A merger is the amalgamation of two or more companies into an entirely new entity by combining the assets and liabilities of both companies into one.
This differs from a traditional merger in that neither of the two companies involved survives as a legal entity.
The transferring company is taken over by a stronger receiving company, resulting in an organization with a stronger client base and more assets.
Consolidation can help increase cash resources, eliminate competition and save companies on taxes.
“But it can lead to a monopoly if too much competition is cut, the workforce is reduced, and the new venture’s debt burden is increased.
Acquisition premium is the difference between the estimated real value of a company and the actual price paid for its acquisition in an M&A transaction.
Performance Based Management (ABM) is a means of analyzing a company’s profitability by looking at every aspect of its business to determine its strengths and weaknesses.
Back integration is when a company expands its role to perform tasks that were previously performed by enterprises located higher up in the supply chain.
Share capital is the number of ordinary and preferred shares that the company has the right to issue and which are accounted for on the balance sheet as part of share capital.
As a result of the spin-off, the parent company sells a portion of its shares in its subsidiary to the public through an initial public offering (IPO), effectively turning the subsidiary into a stand-alone company.