Mergers and acquisitions what is

In the absence of unfavorable economic conditions , shareholders of the merged company usually experience favorable long-term performance and dividends. Note that the shareholders of both companies may experience a dilution of voting power due to the increased number of shares released during the merger process. This phenomenon is prominent in stock-for-stock mergers , when the new company offers its shares in exchange for shares in the target company, at an agreed-upon conversion rate.

Shareholders of the acquiring company experience a marginal loss of voting power, while shareholders of a smaller target company may see a significant erosion of their voting powers in the relatively larger pool of stakeholders. Horizontal integration and vertical integration are competitive strategies that companies use to consolidate their position among competitors. Horizontal integration is the acquisition of a related business. A company that opts for horizontal integration will take over another company that operates at the same level of the value chain in an industry—for instance when Marriott International, Inc.

Vertical integration refers to the process of acquiring business operations within the same production vertical. A company that opts for vertical integration takes complete control over one or more stages in the production or distribution of a product.

Apple, for example, acquired AuthenTec, which makes the touch ID fingerprint sensor technology that goes into its iPhones. Marriott International. Securities and Exchange Commission. Form 8-K. Career Advice. Actively scan device characteristics for identification. Use precise geolocation data. Select personalised content. Create a personalised content profile. Measure ad performance. Select basic ads. Create a personalised ads profile.

Select personalised ads. Apply market research to generate audience insights. Measure content performance. Develop and improve products. List of Partners vendors. Guide to Mergers and Acquisitions. Your Money. Personal Finance. Your Practice. Popular Courses. Part Of. Reverse Mergers. Table of Contents Expand. Different Types. How Mergers Are Structured.

How Acquisitions Are Financed. Valuing Mergers and Acquisitions. How Do Mergers Differ from Acquisitions? What Is a Hostile Takeover? Key Takeaways The terms "mergers" and "acquisitions" are often used interchangeably, but they differ in meaning. In an acquisition, one company purchases another outright. A merger is the combination of two firms, which subsequently form a new legal entity under the banner of one corporate name.

A company can be objectively valued by studying comparable companies in an industry and using metrics. Article Sources.

Eliminating staffing redundancies can help reduce costs. Improved labor talent. Expanding the labor pool from which the new, larger company can draw can aid in growth and development.

Enhanced financial resources. The financial wherewithal of two companies is generally greater than one alone, making new investments possible. Potential Drawbacks Although mergers and acquisitions are expensive undertakings, there are potential rewards. And there are disadvantages, or reasons not to purchase an acquisition, including: Large expenses associated with buying a company, especially if it does not want to be acquired.

If an investor has a controlling interest in another company, however, it may not have a choice regarding whether it is acquired. Higher legal costs, which can be exorbitant if a company does not want to be acquired. The opportunity cost of having to forego other deals in order to focus on bringing two companies together.

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Email address Get updates No charge. Unsubscribe anytime. For non-public companies, liability mainly stems from the failure to meet with the provisions set out in the agreement. One of the advantages of executing a merger is that there are few restrictions. They are also an ideal option for investors that are time-constrained and without needing to step up a company.

Related services We can help you assess a potential business partner. The main control imposed by governing officials is on the size of the merged company. In this context, it is important to determine what percentage of market share the newly merged company will hold. If it will possess more than 50 percent, the merger will be prohibited. If it is between 30 and 50 percent, a legal representative of the company must first obtain permission from the administrative agency for competition before implementing the merger.

In the case of capital and shares, investors must comply with the laws on securities for public and listed companies. If a company has been converted or equitized, it has to follow all regulations applicable to conversion and equitization.

Lastly, the nature of the investment should conform to international agreements that Vietnam is part of. For acquisitions — getting information about the targeted company can still be challenging in Vietnam as the targeted company is not required to disclose information to a buyer. This can lead to larger wait times while the acquiring company does it legal and financial due diligence.

In addition, certain sectors such as banking, financial and insurance services are governed by specific regulations. If an acquiring company wants to acquire a company in these sectors it will be subject to additional regulations as per local law. There are three basic types of mergers: a merger of two foreign-owned companies; the merger of two local companies; and the merger of a locally-owned company with a foreign-owned one.

In addition, a merger contract is always necessary, which determines ownership after the merger. Once the merger contract has been completed, procedures for the merger takes approximately 30 days. While executing a merger can become a detailed and daunting task, the actual steps required are not extensive.

The government has worked diligently to make the process appealing and straightforward to encourage foreign investment.