Mergers and Acquisitions (M&A) is the area of corporate financing, management and strategy dealing with purchasing and or joining with other companies. It is an umbrella term for various transactions such as mergers, acquisitions, consolidations, tender offers, purchase of offers and management acquisitions. In mergers and acquisition two companies are involved but in merger two companies are combined in one and in acquisition one usually larger company buys another smaller company.
From a legal point of view, a merger is a legal consolidation of two entities into one entity, whereas acquisition occurs when one entity takes ownership of another entity’s stock, equity interests or assets. From a commercial and economic point of view, both types of transactions generally results in the consolidation of assets and liabilities and liabilities into one entity and the distinction between a merger and an acquisition is less clear. Even though they are used as synonyms they are not the same thing. In a merger new company is created were both companies are theoretically equal so sometimes it is called ‘merger of equals’.
Merger also means new ownership and management and the new stock is issued. With acquisition new company doesn’t emerge but target company becomes a part of acquiring company. Acquisitions are sometimes known as hostile takeovers and they carry negative connotation so sometimes acquisition may be called a merger even if it technically isn’t. Real difference is in how the acquisition communicated and perceived by the target company, it’s board of directors, managements and employees.
The acquiring company can buy target company with cash, stocks or both combined. The special type of acquisition is reverse merger. It is a deal that enables a private company to become publicly traded in short amount of time. Private company acquires a public shell with little assets and no operation and in that way reverse merges into a public company.
Mina Mar Group provides comprehensive consulting services in the merger and acquisition sector. We specialize in reverse mergers, matching emerging growth companies that are looking to become publicly traded with appropriate shell companies. We provide guidance on all the aspects of reverse merger process, from initial introductions through the actual closing of the deal.
