Difference between mergers and acquisition

When 2 Companies A and B merge then generally a new Company
C is created, both A and B loose their Identity to form C.

Here A + B = C.

While in case of Acquisition a firm retains its identity
and acquire other company.

Here A + B = A....size of A increases after it acquires B
and B looses its identity to become a part of A.


1) Amalgamation

The merging of two or more businesses into a single entity

Ex: Amalgamation of Global Trust Bank with Oriental Bank of Commerce in 2004.

All the branches of Global Trust Bank Ltd. will function as branches of Oriental Bank of Commerce



Merger
combining of two or more companies by offering the stockholders of one company securities in the acquiring company in exchange for the surrender of their stock.

Ex: Nokia and Siemens.



Demerger
A form of restructure in which shareholders in the parent company gain direct ownership in a subsidiary (the ‘demerged entity’). The ownership of the companies that formed part of the group does not change. The company that ceases to own the entity is known as the ‘demerging entity’

Ex: Reliance



Slump Sale
transfer or sale of one or more undertakings for a lump sum consideration. No values are assigned to individual assets and liabilities



Take Over
It is the purchase of one company (the target) by another (the acquirer)

Ex: Tatas taken over Videsh Sanchar Nigam Limited



Disinvestment
Disinvestment involves the sale of equity and bond capital invested by the government in PSUs. (or) sale of government's loan capital in PSUs through securitization. However, it is the government and not the PSUs who receive money from disinvestment.

Ex: HPCL and BPCL



Joint Venture
It is an entity formed between two or more parties to undertake economic activity together.

Ex: Sony Ericsson



Franchising
The franchisor grants the independent operator the right to distribute its products, techniques, and trademarks for a percentage of gross monthly sales and a royalty fee.

Ex: A Vending Machine operator may receive a franchise for a particular kind of vending machine



9. Strategic Alliances

It is a formal relationship formed between two or more parties to pursue a set of agreed upon goals or to meet a critical business need while remaining independent organizations.

Ex: Technology Transfer