FINA 2710 Lecture Notes - Lecture 5: Horizontal Integration, The Purchase Price, Confectionery
Document Summary
A merger is when two companies combine into a new entity with a single top management and common ownership. In a merger transaction, two companies, say m and n , will pool all their assets and liabilities together to form another holding company mn. Shareholders exchange their shares in m or n for shares in this new entity. An example of a genuine merger is that between exxon and mobil. An acquisition (or takeover) is when one company buys all or most of the assets of another company. For an acquisition, company m (i. e. acquirer) buys out company n (i. e. For an acquisition, company m (i. e. acquirer) buys out company n (i. e. target). In general, the acquiring company will extinguish the target firm to act as a new independent unit. However, the identity of the target may be kept for marketing reasons. The purchase price normally consists of cash or shares offered by the acquirer.
