Mergers And Acquisitions

MERGERS AND ACQUISITIONS

MERGER A

merger is where two or more businesses join forces to become one organization. After the merger, each of the businesses and their shares will no longer exist. Instead a new legal entity has been formed.

AQUISITION  An

acquisition is the purchase or takeover of another business, so that the organization becomes the legal owner and controller of the business they have acquired. This can be expensive as the acquiring company will be paying for the net assets, goodwill and brand name of the company they are buying.

TYPES OF MERGER AND AQUISITION  Horizontal

merger  Vertical merger  Conglomeration merger  Forward Merger  Reverse Merger

HORIZONTAL MERGER  This

occurs when two companies that are in direct competition with each other in the same product lines and markets decide to merge.

VERTICAL MERGER  This

occurs when a supplier company, mergers with a company that they supply goods or services to ie supply and customer decide to merge. An example of this is a pizza restaurant chain merging with the company that supplies them with pizza bases.

CONGLOMERATION MERGER  If

two companies that do not have a common business area merge together this is called a conglomeration.

FORWARD MERGER Mechanism Acquirer



The target merges into the acquirer

Taxability Merger

Target



Forward merger would be taxable in the hands of the target since the same would be considered as asset sale by the target to the acquirer



Shareholders would be taxable on the amount distributed at the time of liquidation of the target

REVERSE MERGER Acquirer

Mechanism 

Merger

Taxability 

Target

The acquirer merges into the target

Reverse merger would be treated as as stock acquisition by the acquirer since the shareholders of the acquirer get stock in the target