A merger or acquisition is a process by which two companies become consolidated into a single entity. A merger or acquisition may be done to increase a company's reach or to gain a larger market share. Some acquisitions may also be done to acquire another company's supplier to reduce production costs. Companies may also acquire companies in other markets to diversify their business. In a merger, two companies, usually of about equal size, agree to join together to become a new company. The stock of both companies is surrendered and they instead trade shares of the new joint company. For a merger to take place, the board of directors of both companies must agree to the action. In an acquisition, a larger company takes over another smaller company. The stocks of the acquired company cease to be traded, while shares of the larger company continue to trade. This may be a "friendly" acquisition, where the two companies agree on a price for which the smaller company is purchased. An acquisition may also be "hostile," also known as a hostile takeover, in which the smaller company is acquired without the approval of the board of directors. This may be done by buying a majority share of the smaller company's stocks, for instance.Merger and Acquisition (M&A) Definition
Defining M&A in Simple Terms
How a Merger & Acquisition Takes Place
Mergers and Acquisitions (M&A) FAQs
M&A stands for Mergers and Acquisition.
A merger or acquisition is a process by which two companies become consolidated into a single entity.
A merger or acquisition may be done to increase a company’s reach or to gain a larger market share.
The stock of both companies is surrendered and they instead trade shares of the new joint company.
An acquisition may be known as a hostile takeover when the smaller company is acquired without the approval of the board of directors.
True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.
True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.
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