The Basics of Mergers and Acquisitions

If you are in the business field, you may have heard of mergers and acquisitions. These refer to consolidation and often happen to companies or assets. It is also abbreviated as M & A. Keep in mind that you can use the terms mergers and acquisitions interchangeably. However, they have different meanings. If you are in business or want to know more about how you handle company acquisitions, here are some basics of M & A.

Business Brokers Help the Process

When you are ready to buy or sell a business, you may need someone who is an expert in mergers or business brokerage. A business broker is a person that can help you with buying or selling a company. If you are looking for help in your area, or the place you intend to buy in, consider looking online. For example, if you are in Charleston, South Carolina, you could search for a business brokers in Charleston. If you are unsure who you should choose, ask friends, family members, and business partners.

The Terms Have Different Meanings

While you may hear the terms used interchangeably, they have different meanings. A company getting acquired means they are being bought. Companies getting merged means they are combined and become a new entity altogether. One main difference is how the takeover gets announced to others. A hostile takeover may get called an acquisition, while a friendly deal may be called a merger.

If you or your company are considering an acquisition or merger, there are also ways you can get an idea of how much another company is worth. Taking time to value these other companies can save money and help you get the best deal possible.

Types of Deals a Company Makes

There are several types of deals a company may make. While M & A are the most common, there are consolidations, tender offers, acquisition of assets, and management acquisitions. When you consolidate a company, you create new companies altogether and abandon old structures. Stockholders also have to approve the deal. Tender offers mean a company has offered to buy the outstanding stocks of another company. With acquisitions of assets, a company acquires the investments of another business with the shareholders’ approval. Management acquisitions involve executives buying a controlling stake in another company. 

Structures of Mergers

There are several ways a merger can be structured. There are horizontal mergers, vertical mergers, and congeneric mergers. Congeneric deals have companies that serve the same customer base. When the merger is horizontal, companies that are competitors merge. Vertical mergers involve a customer or supplier and a company. 

There are also market-extension mergers, product-extension mergers, and conglomerations. With market-extension deals, two companies selling the same product merge. Product-extension deals involve companies that offer different, related products to the same market. A conglomeration is a deal between two companies that have nothing in common.

If you are interested in business and how companies get merged and acquired, these basics should help. If you are considering buying a company, research to ensure you make the right choice. If you are contemplating merging with another company, be sure it is appropriate for your business.

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