Mergers and acquisitions worldwide - additional information
Mergers and acquisitions (M&A) is an important branch of corporate strategy which deals with the combining, buying and selling of companies with the aim of helping to promote the growth of the enterprise in its particular sector. The combining of a smaller company with a larger company can boost financial power, market share and business activity allowing the newly formed company to further develop and expand within its sector. This is often made possible through the financial backing provided by investment banks.
The lines between "merger" and "acquisition" have become increasingly blurred and the terms are often used interchangeably. They refer, however, to different things: a merger in the purer sense with legal definitions aside, is when two firms agree to go forward together as a single new company rather than remain as two separately owned and run entities. This is sometimes referred to as being the "merger of equals" and takes place in the form of a merger when the companies that join forces are similarly sized and equally matched. If the companies are not equals, one company will usually buy the other and, as part of the terms of the deal, simply allow the firm to proclaim the acquisition as a merger of equals even if it was a simple acquisition.
An acquisition or takeover is the purchase of one company by another company. Achieving success in acquisitions has proved to be very difficult as the acquisition process is notoriously complex. As a rule, an acquisition is the purchase of a smaller company by a larger one. This is not always the case however. The way an acquisition develops, and whether or not it works, depends on a number of factors, crucially often how the takeover is perceived by the employees, shareholders and directors of the company. If they perceive it positively, it is known as a "friendly" acquisition, if not, then the takeover is considered "hostile". If judged to be hostile, the improvement of the terms of the negotiation would usually follow if it was still desirable for the acquisition to go ahead.