Consolidate The Firm
Understanding mergers and acquisitions
A generally preferred term that will describe a consolidation of firms or consolidation of assets. The consolidation is done through different variations of financial transactions. It is abbreviated as M&A which will consist of different types of transactions like:
- Tender offers
- Buying assets
- Acquiring management
Usually, there are two firms that are involved in the above-mentioned cases. The financial institutions that are dealing with mergers and acquisitions have a department which is known as M&A.
There are a number of a variety of transactions and different forms that are included in mergers and acquisitions. When the firms will get engaged in the activities of mergers and acquisitions there are different types of financial transactions which are mentioned below.
- Merger: When there is a merger of two firms, the boards of directors of these firms will be approving the combining and search for the approval of shareholders. When the merger is completed, the firm that has been acquired stops existing and it will become a part of the acquirer.
- Acquisition: In this, the acquiring firm will get the acquired company’s larger part of the stakes and there is no change of name or the legal construct.
- Consolidation: When there is consolidation, there is the creation of a new firm. The approval for consolidation should be got from the shareholders of both the firms. Following the approval, both will get equity shares in common in the new company that is formed.
- Tender offer: There an offer made by one firm to the other that they will buy their stocks that are outstanding but for a specified cost in a tender offer. The communication happens directly with the firm’s shareholders about the offer by the acquiring company and dodging both the management as well as the board of directors.
- Assets acquisition: There is acquiring of the assets by one firm from the other in this. An approval should be got from the shareholders of that frim from whom the assets are being obtained. Typically bankruptcy proceedings are the time during which the purchase of the assets happens and there is bidding of the different assets of the firm that is about to become bankrupt by the other firms. These assets are liquidated when there is transferring of the last assets to the acquirer.
- Management acquisition: This is known by another name, management-led buyout. Here the company is made private by buying a controlling stake by the executives of the firm. To get the funds for these transactions, the executives will team up with a financier.