Mergers and acquisitions (M&A) are transactions in which the ownership of companies, other business organizations or their operating units are transferred or combined.
As an aspect of strategic management, M&A can allow enterprises to grow, shrink, and change the nature of their business or competitive position.
An asset purchase structure may also be used when the buyer wishes to buy a particular division or unit of a company which is not a separate legal entity.
There are numerous challenges particular to this type of transaction, including isolating the specific assets and liabilities that pertain to the unit, determining whether the unit utilizes services from other units of the selling company, transferring employees, transferring permits and licenses, and ensuring that the seller does not compete with the buyer in the same business area in the future.
After due diligence is completed, the parties may proceed to draw up a definitive agreement, known as a "merger agreement", "share purchase agreement" or "asset purchase agreement" depending on the structure of the transaction.
Employee retention is possible only when resources are exchanged and managed without affecting their independence.A transaction legally structured as an acquisition may have the effect of placing one party's business under the indirect ownership of the other party's shareholders, while a transaction legally structured as a merger may give each party's shareholders partial ownership and control of the combined enterprise.A deal may be euphemistically called a merger of equals if both CEOs agree that joining together is in the best interest of both of their companies, while when the deal is unfriendly (that is, when the management of the target company opposes the deal) it may be regarded as an "acquisition".A reverse merger occurs when a privately held company (often one that has strong prospects and is eager to raise financing) buys a publicly listed shell company, usually one with no business and limited assets.The combined evidence suggests that the shareholders of acquired firms realize significant positive "abnormal returns" while shareholders of the acquiring company are most likely to experience a negative wealth effect.The new forms of buy out created since the crisis are based on serial type acquisitions known as an ECO Buyout which is a co-community ownership buy out and the new generation buy outs of the MIBO (Management Involved or Management & Institution Buy Out) and MEIBO (Management & Employee Involved Buy Out).Whether a purchase is perceived as being a "friendly" one or "hostile" depends significantly on how the proposed acquisition is communicated to and perceived by the target company's board of directors, employees and shareholders.Extracting technological benefits during and after acquisition is ever challenging issue because of organizational differences.Based on the content analysis of seven interviews authors concluded five following components for their grounded model of acquisition: An increase in acquisitions in the global business environment requires enterprises to evaluate the key stake holders of acquisition very carefully before implementation.Mergers, asset purchases and equity purchases are each taxed differently, and the most beneficial structure for tax purposes is highly situation-dependent.One hybrid form often employed for tax purposes is a triangular merger, where the target company merges with a shell company wholly owned by the buyer, thus becoming a subsidiary of the buyer. Internal Revenue Code, a forward triangular merger is taxed as if the target company sold its assets to the shell company and then liquidated, whereas a reverse triangular merger is taxed as if the target company's shareholders sold their stock in the target company to the buyer.