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Reviewed by Jul 30, 2021| Updated on
Mergers and acquisitions are business transactions in which the ownership rights of a company gets transferred to another company. This transaction includes transferring of business units, operating units and companies. Mergers and acquisitions, as a strategy of management, allows companies to either expand or shrink and change the business’ nature and competitiveness.
Mergers and acquisitions is a generic term to outline the combining of organisations or capital assets through numerous financial and commercial transactions, which includes mergers and acquisitions, tenders, buying assets and managing acquisitions. Mergers and acquisitions sometimes refer to the division of a company that deals with such activities.
Mergers and acquisitions are often used interchangeably. However, there are minute differences between the two. When an organisation manages to take over another firm and goes onto be the owner, then the purchase is termed as an acquisition. From the legal perspective, the target company will no more exist and the acquirer will go onto absorbing the entity while the absorbers shares will continue to be traded and the ceasing companys shares will no more exist to be traded.
Bitter deals in which the target businesses would not like to be acquired but still go onto be acquired as termed as acquisitions. Hence, purchase deals are categorised under mergers or acquisitions based on the deals being forced or willful.
The term mergers and acquisitions often refer to the one company taking over another. In the case of acquisitions, one organisation will go onto make an outright purchase of another company. The firm that is acquired will not go on to change its structure or legal name. The only thing that changes is the ownership rights will no more belie with the parent company.
The merger of the two organisations will give birth to a new organisation which may be given a new legal or continue to function under the name of any one of the companies that underwent the merger. The significance of the mergers and acquisitions is that they may result in sizeable revenues being generated.