WHAT IS A MERGER?
The word Merger has a strictly legal meaning and has nothing to do with how the combined companies operate in the future. A merger occurs when one corporation is combined with and disappears into another corporation. All mergers are statutory mergers, since all mergers occur as specific formal transactions in accordance with the laws, or statutes, of the states where the companys are incorporated.
A merger occurs when two companies combine to form a single company. A merger is very similar to an acquisition or takeover, except that in the case of a merger existing stockholders of both companies involved retain a shared interest in the new corporation. By contrast, in an acquisition one company purchases a bulk of a second company’s stock, creating an uneven balance of ownership in the new combined company. The entire merger process is usually kept secret from the general public, and often from the majority of the employees at the involved companies. Since the majority of merger attempts do not succeed, and most are kept secret, it is difficult to estimate how many potential mergers occur in a given year. It is likely that the number is very high, however, given the amount of successful mergers and the desirability of mergers for many companies. A merger may be sought for a number of reasons, some of which are beneficial to the shareholders, some of which are not. One use of the
A merger is an economic term meaning the combination of two companies into a larger company. It is a tool used by companies for the purpose of expanding their operations often aiming at an increase of their long term profitability. A merger is generally made voluntarily or through mutual consent involving cash payments given to the target company or through stock swaps which allow both parties shareholders to share the risk involved with the merge. Sometimes a merger is more like a takeover or acquisition but with a new combined company name and logo.
