Mergers and Acquisitions: What are they?

What are mergers and acquisitions?

Enterprise merger and acquisition is a means of capital expansion and business development by transferring ownership or control of a company. It is an important way of capital operation of an enterprise. This means an enterprise using cash, marketable securities, equity, bonds and other means to purchase or acquire the ownership of all or part of the assets of another enterprise, in order to gain control of the latter.

Common classification of mergers and acquisitions:

l. Horizontal merger refers to the merger and acquisition of firms at the same stage in the supply chain in order to improve scale efficiency and market share;

lI. Vertical merger and acquisition refers to the merger and acquisition of firms at different stages of the supply chain, either forward or backward expansion of business;

III. Mixed merger and acquisition refers to the merger and acquisition that combines both horizontal and vertical for the purpose of business diversification and market share.

IV. Conglomerate merger and acquisition refers to merger and acquisition of two companies whose business activities and industries may be completely unrelated.

According to merger and acquisition procedures, mergers and acquisitions can also be divided into:

l. Merger by agreement refers to the acquisition method in which the acquiring company directly contacts the target company without going through the stock exchange and reaches a common agreement through negotiation and negotiation, so as to realize the equity transfer of the target company;

lI. offer acquisition, refers to the merger and acquisition of the company through securities trading on a stock exchange, holds a had 30% of the outstanding shares of listed companies (different countries may have difference law), in accordance with the law to the company all shareholders issued a public tender offer, conform to the law of price to buy shares in currency payment way, Acquisition of equity in a target company.

The merger and acquisition of enterprises is a complex process, and it is necessary to find a balanced solution from corporate strategy, finance, control, operation and many other aspects.

The reasons behind companies seeking mergers/acquisitions

Six purposes of mergers and acquisitions

(1) Low-cost expansion of capital

(2) Integration of business and assets

(3) Explore new markets and expand market share

(4) Expand production scale and reduce costs

(5) Obtain monopoly profit or relative monopoly profit

(6) Obtain capital gains and reflect enterprise value

The merger and acquisition among enterprises is the result of market economy competition. According to the data obtained from interviews with entrepreneurs or operators, the main reasons for mergers and acquisitions are to expand the scale of enterprises, expand new markets and acquire new technologies or mature brands.