Find out about mergers and acquisitions, including how to choose a business advisor to help you through the process.
All About Mergers and Acquisitions
In the corporate world, mergers and acquisitions refer to buying, selling, dividing, and combining different companies. This is a way for companies to grow by buying other companies, or create subsidiaries by adding similar entities under the same umbrella. Let’s look at what differs between mergers and acquisitions, along with some information you’ll need if you’re interested in buying, selling, or combining your business.
The Difference Between a Merger and an Acquisition
To easily distinguish between mergers and acquisitions remember this: A merger is a legal consolidation of two companies. An acquisition happens when one company takes over another company.
There are several different types of mergers.
- A conglomerate merger is where two totally unrelated companies merge, for example, like when Walt Disney Company merged with the American Broadcasting Company.
- A horizontal merger is two businesses in the same industry, it’s more of a consolidation. For example, if two cereal companies merged, it would be a horizontal merge.
- A market extension merger occurs when two companies merge that deal in the same products but in different markets in order to reach a bigger client base. This occurs when banks in different areas merge. They both were in the banking business, but operated in different markets.
- A product extension merger happens between related businesses that share their market. This allows for a wider range of products, bigger customer base, and higher profits. When two cell phone companies merge, it’s this type of merger.
- Lastly, vertical mergers are when two companies that do different things come together for one new product or service. For example, when a car company buys a parts supplier, it allows them to have more control throughout the supply chain, giving greater control over the process.
When it comes to acquisitions, they happen in two ways: when the two companies mutually agree it’s in their best interests to come together, it might be called a “merger of equals,” but if the deal is unfriendly (meaning the target company doesn’t want to be purchased), it’s referred to as an acquisition. There can be an asset acquisition and a stock acquisition.
- Asset acquisitions are when the acquirer buys the target’s assets directly from the seller. The target is essentially liquidated in the acquisition.
- A stock acquisition is when the acquirer buys the target’s stock from shareholders. In this case, the sellers are the shareholders.
What To Do If You’re Interested in a Merger or Acquisition
If you are interested in buying, selling, or combining your business, you need the help of expert advisors. The merger and acquisition processes are complex. You’ll want someone to guide you through paperwork, negotiations, taxes, liabilities, and other details throughout the sale. The easiest way to complete a merger or acquisition is to call Emerald Coast Business Brokers. They will work to prepare a plan that both parties can be happy with. Our team has participated in national and regional mergers and acquisitions. We understand buying and selling businesses, so we can help you grow and diversify your business, or help you find someone who can make the most of your current business by taking over.
Contact one of the advisors at Emerald Coast Business Brokers for a confidential consultation where you can discuss you options for mergers and acquisitions.