Mergers and acquisitions, also known as mergers and acquisitions, are corporate processes of acquiring new assets by acquiring or merging with other businesses. Like any type of business activity, there are pros and cons to both mergers and acquisitions. Some of the advantages include: the potential to add value to a company’s bottom line, the potential to increase market share, and the potential to add assets to a company’s holdings. Although mergers and acquisitions have several advantages, they also have several disadvantages. Some of the downsides include poor public reaction to hostile takeovers, resistance from the target company, and additional acquisition liabilities and problems.
Although mergers and acquisitions are often talked about together, they are different processes. There are two main types of acquisitions, a stock purchase and an asset purchase. In a stock buyout, a company will buy shares of a target company from its shareholders. By doing this, you gain equity in the target company by merging the two companies. The second type of acquisition is an asset purchase. In an asset purchase, the buying company only selects specific assets to purchase. By doing this, the acquiring company can select the assets it wishes to acquire without having to take on the liabilities and problems of the target company.
Mergers are also interested in acquiring assets, however, they finance their purchases differently. There are three basic types of mergers, all-stock deals, all-cash deals, and hybrid deals. In all stock transactions, the merger is financed by exchanging shares of one company for shares of the other. In an all-cash transaction, the cash is used to purchase shares of the company. In hybrid deals, both cash and stock are used to finance the merger deal. The type of financing agreement used will depend on the companies involved and the liquidity of the acquiring company and the target company.