Distinctions between a business combination and a merger, Financial Accounting

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What are the legal distinctions between a business combination, a merger, and a consolidation?

Mergers Vs Acquisitions:

When one company takes over another and clearly establishes itself as the new owner, the purchase is called as acquisition or consolidation. From the legal point of view, the target company ceases, the buyer "swallows" the entity and the buyer's stock continues to be traded whereas a merger happens when two firms agree to go forward as a single company rather than remain separately owned and operated. The firms in merger are often of equal size but it's not necessary. New company's stock is issued in its place by surrendering both companies' stocks.

We can say that a deal will be called a merger when both CEOs agree that joining is in the best interest of both of their companies but when the deal is unfriendly (target company does not want to be purchased) it is always  regarded as an acquisition.

 

 


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