Mergers & Acquisitions
A merge is a term which described the action of two or more companies combining their operations in order to operate as one large business unit. A merger represents a corporate combination in which it is only one company which at the end survives. A merger or a corporate combination can be implemented in three different ways including pooling of interests, through purchases and acquisition, or through consolidation. Pooling of internet is commonly achieved when there is a stock swap at a recommended ratio. For example in one of the recent merger, M&I merged with National City Bancoporation where there was a common stock swap for the two companies at a ration of 0.65556 to .053636 of M&I Bank for each share of National City Bancoporation. This is also referred to as tax-free mergers and is allowed when it meets legal requirement.
On the other hand purchase acquisition involves one company purchasing the stock or all the assets that are owned by another company. This is a tender offer where the shareholders of a company tender their share of stock to be purchased by another company. For example, a recent 2001 acquisition of Consolidated Bank by Stora-Enso can be taken a good example. Consolidation happens when all the existing corporate which want to come together technically dissolves and forms a new company which combines the assets of all the companies. The stock is issued to shareholder of all the companies which are coming together. For example the recent consolidation of Exxon and Mobil Oil company. There can also be vertical, horizontal and conglomerate mergers which are all related to competition factors. (Fairburn and Kay, 1999)