Mergers and Acquisitions (M&A) Transaction

A Mergers and Acquisitions (M&A) Transaction is a business transaction in which the ownership of one company, business organization, or operational unit is transferred to or consolidated with another company.

• Context:
  • It can (typically) be driven by Strategic Management goals, such as entering new markets, acquiring technology, or eliminating competition.
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  • It can range from a Stock Purchase (acquiring ownership through buying shares) to an Asset Purchase (acquiring specific assets instead of the entire company).
  • It can range from a Cash Acquisition to a Stock-Based Acquisition, depending on the payment method, where the acquiring company may use cash reserves or its own stock as currency.
  • It can range from being a Leveraged Buyout, where the acquisition is financed with borrowed funds, to a Management Buyout, where the current management acquires ownership.
  • It can range from a Public Company Acquisition to a Private Company Acquisition, depending on whether the target company is publicly traded or privately held.
  • It can range from being a Horizontal Merger (between companies in the same industry) to a Vertical Merger (between companies at different stages of production), depending on the strategic objectives.
  • It can range from being a Divestiture Acquisition (where a business sells off a part of itself) to being a Whole-Company Acquisition, depending on the scope of the acquisition and strategic goals.
  • It can range from a Friendly Acquisition, where both parties agree on the terms, to a Hostile Takeover, where the target resists acquisition efforts.
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  • It can require compliance with Antitrust Regulations or Competition Law in various countries, often involving oversight from regulatory bodies like the Federal Trade Commission in the United States.
  • It can involve the consolidation of Assets, Liabilities, and Equity (Finance), creating a new financial structure under a single entity.
  • It can impact Employee Retention and may lead to restructuring activities, such as Layoffs, as part of post-merger integration.
  • It can be conducted through various methods, such as a Tender Offer (public offer to buy shares) or an Asset Purchase Agreement, each involving specific legal and financial procedures.
  • It can influence Share Capital distribution, with shares in the acquired company often converted to the acquiring company’s shares or bought out entirely.
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• Example(s):
  • a Horizontal Merger between two tech companies, such as the acquisition of WhatsApp by Facebook, aimed at consolidating user bases and technology.
  • a Vertical Acquisition where a retailer acquires a supplier to streamline its supply chain, such as Amazon's acquisition of Whole Foods in 2017 to vertically integrate its grocery supply chain.
  • a Hostile Takeover in which a company attempts to acquire another without the board’s approval, as seen in Oracle’s 2003 hostile bid for PeopleSoft.
  • a Tender Offer where an acquiring company publicly offers to buy shares of the target company, like AT&T's $85 billion acquisition of Time Warner in 2018.
  • a Reverse Merger, where a private company acquires a public company to bypass the IPO process, as seen in Burger King’s merger with Justice Holdings in 2012.
  • a Merger of Equals where two companies combine as roughly equal partners, such as the merger of Dow Chemical and DuPont in 2017 to form DowDuPont.
  • an Acquisition for Market Entry, such as Google’s acquisition of Motorola Mobility in 2012 to establish a foothold in the mobile phone market.
  • an Asset Purchase Agreement, such as when Apple acquired patents and key assets from Nortel Networks in 2011 to strengthen its intellectual property portfolio.
  • a Cross-Border Acquisition, such as Tata Motors’ acquisition of Jaguar Land Rover in 2008, allowing Tata to enter the global luxury car market.
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• Counter-Example(s):
  • a Joint Venture, where two companies collaborate on a project but retain separate legal identities.
  • a Strategic Alliance, which involves cooperative agreements but does not include ownership transfer or consolidation of assets.
  • a Licensing Agreement, which permits one company to use another’s technology or brand without transferring ownership or merging entities.
• See: Federal Trade Commission, Company, Legal Entity Types by Country, Consolidation (Business), Strategic Management, Layoff, Share Capital, Equity (Finance), Asset, Liability (Financial Accounting), United States Antitrust Law, Competition Law.

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References

2024

• (Wikipedia, 2024) ⇒ https://en.wikipedia.org/wiki/Mergers_and_acquisitions Retrieved:2024-10-29.
  • Mergers and acquisitions (M&A) are business transactions in which the ownership of companies, business organizations, or their operating units are transferred to or consolidated with another company or business organization. This could happen through direct absorption, a merger, a tender offer or a hostile takeover. As an aspect of strategic management, M&A can allow enterprises to grow or downsize, and change the nature of their business or competitive position.

    Technically, a is the legal consolidation of two business entities into one, whereas an occurs when one entity takes ownership of another entity's share capital, equity interests or assets. From a legal and financial point of view, both mergers and acquisitions generally result in the consolidation of assets and liabilities under one entity, and the distinction between the two is not always clear.

    Most countries require mergers and acquisitions to comply with antitrust or competition law. In the United States, for example, the Clayton Act outlaws any merger or acquisition that may "substantially lessen competition" or "tend to create a monopoly", and the Hart–Scott–Rodino Act requires notifying the U.S. Department of Justice's Antitrust Division and the Federal Trade Commission about any merger or acquisition over a certain size.

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