However, if a merger is not successful, it can cause problem for the resulting organization. Nevertheless, the strategy to merge or acquire can be guided by the corporate philosophy that an organization may follow.
Mergers and acquisitions are often taken to be as same terminologies however there is a difference between them. The differences, types, advantages and disadvantages of mergers and acquisitions will be discussed in detail in this assignment.
Mergers and acquisition often abbreviated as M&A refers to the strategies and finance related to the corporate level and management which deals with the purchase, selling and joining of different companies for the purpose of assisting or helping a company grow in its respective industry without establishing a new business. Mergers or acquisitions may be private or public depending on whether the merging company is in the list of the public companies or not. These types of dealings can be either friendly or hostile.
In the situation where one company takes over another company and declares itself as the new company, the purchase is termed to be as acquisition. Legally, the company that has been purchased can no longer operate in the market and the buyer is free to trade its stocks and shares. In merger, the two companies combine and continue to work as one business rather than existing as separate businesses. This usually takes place between companies which are of the same status, their previous stocks are dissolved and new stocks are maintained. This is usually termed as ‘merger of equals’. For instance in 1999 a merger took place between two pharmaceutical companies; GlaxoWellcome and SmithKline Beecham, both the firms combined together to and a new company, GlaxoSmithKline emerged. (Sherman, 2006)
Vertical Merger: This type of merger takes place between a company and a supplier or to say it in other words, company