The document defines mergers and consolidations, with mergers absorbing one firm into another which retains its name and identity, and consolidations creating an entirely new firm. Mergers are legally straightforward but require shareholder approval. Types of mergers include stock acquisitions through tender offers contingent on obtaining a percentage of shares, and asset acquisitions requiring a shareholder vote but avoiding potential minority shareholders. The goal of mergers and acquisitions is to increase size and market value, with the latter being more difficult to achieve.

4. Merger
 A merger refers to the absorption of one firm by
another. The acquiring firm retains its name and
identity, and acquires all the assets and liabilities of
the acquired firm. After the merger, the acquired firm
ceases to exist as a separate entity.
 A consolidation is the same as a merger except that an
entirely new firm is created. In a consolidation, both
the acquiring firm and the acquired firm terminate
their previous legal existence.
 An advantage of using a merger to acquire a firm is
that it is legally straightforward and does not cost as
much as other forms of acquisition.
 A disadvantage is that a merger must be approved by a
vote of the shareholders of each firm.

5. Types of Mergers

6. Acquisition of Stock
 A firm can acquire another firm by purchasing target
firm’s voting stock in exchange for cash, shares of
stock, or other securities.
 A tender offer is a public offer to buy shares made by
one firm directly to the shareholders of another firm.
 If the shareholders choose to accept the offer, they
tender their shares by exchanging them for cash or
securities.
 A tender offer is frequently contingent on the bidder’s
obtaining some percentage of the total voting shares.
 If not enough shares are tendered, then the offer might
be withdrawn or reformulated.

7. ACQUISITION OF ASSETS
 One firm can acquire another by buying all of its assets.
 A formal vote of the shareholders of the selling firm is required.
 Advantage of this approach: it avoids the potential problem of
having minority shareholders that may occur in an acquisition of
stock.
 Disadvantage of this approach: it involves a costly legal process
of transferring title.

8. Goal of Acquisitions and Mergers
• Increase size - easy!
• Increase market value - much harder!

9. Mergers vs Acquisition

10. Hey Friend,
This was just a summary on Mergers & Acquisitions. For
more detailed information on this topic, please type the link
given below or copy it from the description of this PPT and
open it in a new browser window.
www.transtutors.com/homework-help/finance/mergers-and-acquisitions.aspx