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Definition: Mergers and Acquisitions (M&A)
A ‘merger’ or ‘amalgamation’ is a combination of two or more businesses into one business;such that all assets and liabilities of the merging companies become those of the amalgamated company, and shareholders in the separate companies become shareholders of the amalgamated company.
‘Horizontal merger’ involves the combining of firms in the same area of business.
‘Vertical merger’ is a combination of firms involved in different stages of production or distribution of the same product or value chain.
‘Conglomerate merger’ is a combination of firms engaged in unrelated lines of business activity.
Mergers can be through ‘Absorption’ (wherein, all companies except one lose their identity in such a merger) or through ‘Consolidation’ (wherein, all companies are legally dissolved and a new entity is created).
An ‘acquisition’ may be defined as an act of acquiring effective control by one company over assets or management of another company without any combination of companies. Thus, the separate companies may remain independent legal entities, but there shall be a change in control of the companies.
When an acquisition is 'forced' or 'unwilling', it is called a ‘takeover’ or a ‘hostile takeover’. In an unwilling acquisition, the management of 'target' company would oppose a move of being taken over.