Brief on M&A
Mergers and acquisitions (M&A) refer to transactions between two companies combining in some form. Although mergers and acquisitions (M&A) are used interchangeably, they come with different legal meanings. In a merger, two companies of similar size combine to form a new single entity.
On the other hand, an acquisition is when a larger company acquires a smaller company, thereby absorbing the business of the smaller company. M&A deals can be friendly or hostile, depending on the approval of the target company’s board.
Programmatic M&A can help companies build resiliency, but this approach to deal making requires a solid game plan—one that will guide proactive deal sourcing and opportunistic deal evaluation. The M&A blueprint prompts business leaders to conduct a thorough self-assessment along with a comprehensive market assessment.
Types of Mergers and Acquisitions (M&A) Transactions:
- Horizontal: A horizontal merger happens between two companies that operate in similar industries that may or may not be direct competitors.
- Vertical: A vertical merger takes place between a company and its supplier or a customer along its supply chain. The company aims to move up or down along its supply chain, thus consolidating its position in the industry.
- Conglomerate: This type of transaction is usually done for diversification reasons and is between companies in unrelated industries.
Forms of Integration of Mergers and Acquisitions (M&A): U1
- Statutory: Statutory mergers usually occur when the acquirer is much larger than the target and acquires the target’s assets and liabilities. After the deal, the target company ceases to exist as a separate entity.
- Subsidiary: In a subsidiary merger, the target becomes a subsidiary of the acquirer but continues to maintain its business.
- Consolidation: In a consolidation, both companies in the transaction cease to exist after the deal, and a completely new entity is formed.