M&A
M&A - 'Mergers and Acquisitions'
M&A can include a number of different transactions, detailed below.
Merger:
In a merger, the boards of directors for two companies approve the combination and seek shareholders' approval. After the merger, the acquired company ceases to exist and becomes part of the acquiring company. For example, in 2007 a merger deal occurred between Digital Computers and Compaq whereby Compaq absorbed Digital Computers.
Acquisition:
In a simple acquisition, the acquiring company obtains the majority stake in the acquired firm, which does not change its name or legal structure. An example of this transaction is Manulife Financial Corporation's 2004 acquisition of John Hancock Financial Services, where both companies preserved their names and organizational structures.
Consolidation: A consolidation creates a new company. Stockholders of both companies must approve the consolidation, and subsequent to the approval, they receive common equity shares in the new firm. For example, in 1998 Citicorp and Traveler's Insurance Group announced a consolidation, which resulted in Citigroup.
Tender Offer: In a tender offer, one company offers to purchase the outstanding stock of the other firm at a specific price. The acquiring company communicates the offer directly to the other company's shareholders, bypassing the management and board of directors. Example: when Johnson & Johnson made a tender offer in 2008 to acquire Omrix Biopharmaceuticals for $438 million. While the acquiring company may continue to exist — especially if there are certain dissenting shareholders — most tender offers result in mergers.
Acquisition of Assets: In a purchase of assets, one company acquires the assets of another company. The company whose assets are being acquired must obtain approval from its shareholders. The purchase of assets is typical during bankruptcy proceedings, where other companies bid for various assets of the bankrupt company, which is liquidated upon the final transfer of assets to the acquiring firm(s).
Management Acquisition: In a management acquisition, also known as a management-led buyout (MBO), the executives of a company purchase a controlling stake in a company, making it private. Often, these former executives partner with a financier or former corporate officers in order to help fund a transaction. Such an M&A transaction is typically financed disproportionately with debt, and the majority of shareholders must approve it. For example, in 2013, Dell Corporation announced that it was acquired by its chief executive manager, Michael Dell.
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