Understanding Mergers & Acquisitions From Bala Srinivasa Rao Namburi

Mergers and acquisitions (M & M&A) is a broad phrase that refers to various financial transactions that combine firms or assets, such as mergers, acquisitions, consolidations, tender offers, asset purchases, and management acquisitions.

M&A also refers to the departments within financial institutions that deal with such transactions.

Mergers & Acquisitions: What You Need to Know

Mergers and acquisitions are sometimes used interchangeably, yet they have slightly different meanings.

A merger occurs when two similar-sized companies join together to create a new entity, known as a merger of equals. When Daimler-Benz and Chrysler merged, the two companies ceased to exist, and a new corporation, DaimlerChrysler, was formed. The stock of both firms was relinquished, and new company stock was issued.

When both CEOs agree that merging their companies is in their best interests, a purchase arrangement is a merger.

Acquisitions are usually considered unfriendly or hostile takeover negotiations in which the target company does not want to be bought. A deal may be classified as a merger or an acquisition depending on whether the acquisition is friendly or hostile and how it is publicized. In other words, the difference is in how the target company's board of directors, employees, and shareholders are informed about the sale.

Mergers and Acquisitions Types

The following are some examples of common M&A transactions.:

Mergers

When the boards of two companies agree to merge and seek shareholder approval, it is called a merger. The Digital Equipment Corporation and Compaq merged in 1998, with Compaq absorbing the Digital Equipment Corporation. CPQ was Compaq's pre-merger ticker symbol. The present ticker symbol was created by combining Hewlett-(HWP) Packard's ticker symbol (HPQ).

Acquisitions

In a straightforward purchase, the acquiring corporation acquires a majority interest in the acquired company, retaining its name and organizational structure. Manulife Financial Corporation's acquisition of John Hancock Financial Services in 2004 is an example of this type of deal, in which both companies kept their identities and organizational structures.

Consolidations

The consolidation creates a new corporation by integrating core operations and eliminating previous organizational structures. For example, Citicorp and Travelers Insurance Group announced a merger in 1998, resulting in Citigroup. Both companies' stockholders must approve the merger, after which they will get common equity shares in the new company.

Tender Submissions

A tender offer is when one firm offers to buy the outstanding stock of another company for a set price rather than the market price. The purchasing firm informs the other business's shareholders directly, bypassing management and the board of directors. Most tender offers culminate in mergers, even if the acquiring business may continue to exist (especially if there are a few dissenting shareholders). Johnson & Johnson, for example, made a $438 million tender offer to purchase Omrix Biopharmaceuticals in 2008.

Bringing It To A Close

Mergers and Acquisitions (M&A) is a broad phrase that refers to the process of merging and acquiring businesses. A merger occurs when two companies join to form a new entity, whereas an acquisition occurs when one company buys another without becoming a new corporation.

Srinivasa Rao Namburi is a steadfast professional leader who communicates his vision and inspires others to see the same goal and understand how they can make a long-term difference in the community. Srinivasa is a responsible leader who delegated work to his teams and did not take on any projects independently.

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