Business Combination Agreement Investopedia

Mergers are the most common way to gain market share, reduce operating costs, expand into new territories, merge common products, increase revenue and increase profits – all of which should benefit corporate shareholders. Following a merger, the shares of the new company will be distributed to the current shareholders of the two original companies. The terms „mergers“ and „acquisitions“ are often used in a synonymous way, although they actually have somewhat different meanings. When a business takes over another entity and establishes itself as a new owner, the purchase is characterized as an acquisition. From a legal point of view, the target company ceases to exist, the buyer accepts the transaction and the buyer`s shares continue to be traded while the shares of the target company are no longer traded. A merger occurs when an entity has an advantage in combining its activities with another company in a way that contributes to greater shareholder value. It is, in many ways, akin to an acquisition, which is why the two shares are so often grouped into mergers and acquisitions (M-A). In the event of consolidation of the business, the purchaser then declares consolidated results that combine its own financial statements with those of the acquired. In this consolidation, the purchaser does not include the purchaser`s financial statements for the periods prior to the acquisition date. This is a merger between two or more unrelated companies. Companies may operate in different industrial sectors or in different geographic regions.

A simple conglomerate consists of two companies that have nothing in common. On the other hand, a mixed conglomerate occurs between organizations that, although active in unrelated activities, are effectively seeking to expand products or markets through concentration. A combination of companies is neither the creation of a joint venture nor the acquisition of a set of assets that do not constitute a business. The companies hoped that this agreement would help develop the group`s parcel distribution activities with the two companies that combine Eveready`s marketing and distribution expertise with McLeod Russel`s knowledge of tea plantations.