Mergers and Acquisitions 2023: Differences and Examples

So many companies are trying to merge, some are acquiring other companies to have power in the market share. Mergers and acquisitions are a crucial topic in the business world. However, this article will be revealing secrets about the differences between mergers and acquisitions. Also, it will discuss some of the mergers and acquisitions lawyers and examples. Not forgetting the upcoming mergers and acquisitions in 2021.

Mergers and Acquisitions

Mergers and acquisitions is a general term used to describe the union of companies or assets through various types of financial transactions. These transactions include mergers, acquisitions, consolidations, management acquisitions, tender offers, and the purchase of assets.

The terms “mergers” and “acquisitions” are frequently used interchangeably, however, in detail, they carry somewhat different meanings.

Nevertheless, when one company acquires another and sets itself as the new owner, the purchase is called an acquisition.

While, a merger is the joining of two existing companies into one legal entity, rather than remain separately owned and operated. Also, this action is known as a merger of equals.

For example, both Adell networks and Glob computers ceased to exist when the two firms merged. However, a new company, Adell Glob will be created. Also, Both companies’ stocks will be surrendered and new company stock will be issued in its place.

Furthermore, a purchase deal will also be called a merger when both companies voluntarily agree in their best interest.

However,  hostile takeover deals, where target companies do not wish to be purchased, are often seen as acquisitions. Indeed, a deal can be classified as a merger or an acquisition, based on whether it’s friendly or hostile. In other words, the contrast lies in how the transaction is related to the company’s board of directors, employees, and shareholders.

Reasons for Mergers and Acquisitions (M&A) Activity

Mergers and acquisitions (M&A) can occur for several reasons, such as:

1. Creating Synergies

The common reason for mergers and acquisitions is to create synergies. Thus, the merged/acquired company is worth more than the two companies individually. Also, synergies can be due to cost reduction or higher revenues. Additionally, there are two types of synergies, in this case, the cost, and the revenue synergies.

Cost synergies are formed due to economies of scale, while revenue synergies are generally created by cross-selling and increasing market share. However, between the two, cost synergies can be easily quantified and calculated.

2. Higher market Share

In a horizontal merger, the combined entity will attain a higher market share. Thus, gaining the power to influence prices. However, vertical mergers will be more in control of its supply chain, thus avoiding external shocks in supply.

3. Higher growth

Growth through mergers and acquisitions is usually a faster way for a company to achieve higher revenues. Eventually, a company can gain by acquiring a company with the latest skills without having to take the risk of developing the same internally.

4. Diversification

Companies that operate in cyclical industries prefer to diversify their cash flows to avoid vital losses during a slowdown. Acquiring a business in a non-cyclical industry enables a company to diversify and reduce its market risk.

What Are the Difference Between Mergers and Acquisitions?

Merger

A merger is an agreement that joins two existing companies into one new company. However, there are various types of mergers and also several reasons why businesses merge. Additionally, a merger is a corporate means to join with another company and operate as a single legal entity.

However, Mergers are generally done to increase a company’s reach, grow into new segments, or gain market share. Indeed, the major reason for mergers is to increase shareholder value. Nevertheless, during a merger, companies have a no-shop clause to avoid purchases or mergers by additional companies. Also, the businesses agreeing to mergers are often equal in terms of size and scale of operations.

Acquisitions

In an acquisition, a new company does not emerge. Instead, the smaller company ceases to exist with its assets becoming part of the larger company. Acquisitions, sometimes called takeovers, often carry more negative impressions than mergers. As a result, acquiring companies may refer to acquisition as a merger even though it’s obviously a takeover.

An acquisition happens when one company takes over all of the operational management decisions of another company. However, acquisitions require large amounts of cash, but the buyer’s power is absolute.

Now, as promised, lets discuss some of the mergers and acquisitions examples.

Mergers and Acquisitions Examples

Mergers and acquisitions have helped a lot of businesses to sustains their going concern in the business world. Here are some perfect examples of mergers and acquisitions.

Walt Disney Co. and Pixar Mergers

This example arises from the entertainment industry. In 2007, the Walt Disney Company acquired Pixar Entertainment for $7.4 billion. Moreover, this is a merger that makes sense at every level.

Walt Disney has been the market leader in family entertainment for decades, creating masterpieces such as Cinderella, and The Lion King. However, Pixar was a newbie on the market but made a huge impression with its popular movies like Toy Story.

Nevertheless, the synergy between the two companies was obvious even to random viewers. The merger allowed Disney to confirm its brand as the biggest provider of family-friendly movies. Also, it gave Pixar great improvement to its production process and release two new movies per year. Moreover, the post-merger Pixar films, including Up and WALL-E, have been largely successful.

In addition, the possibility is strong that this merger will go down as one of the most lucrative in history as Disney Pixar continues to flourish and increase.

Sirius and XM Radio Mergers

Other examples of mergers and acquisitions are mergers among satellite radio’s two largest providers that almost didn’t occur. However, in 1997, the FCC granted licenses to these two companies only if they would not merge. Therefore, when the merger was declared in 2007, it depended solely on the FCCs willingness to reverse its earlier conditions

The merger made the new company attract celebrities like Oprah Winfrey, Martha Stewart, and Howard Stern, whose reputation brought in new subscribers. However, Sirius XM extends to seek out new acquisitions and we anticipate the company will continue to evolve.

Google and Android

This is one popular example of successful vertical mergers. It is the union between tech giant Google and Android. This merger enabled Google to set itself as the number one search provider in the world.

The acquisition occurred in 2007 when Google acquired Android for the relatively low price of $50 million. However, Google spent the next three years using the Android technology to developing a new operating system for mobile devices.

It is obvious that the Google-Android merger was a huge success. In 2018, about 88% of all new mobile phones sold were powered by Android. However, this large market share would not have been possible without Google’s merger with Android.

Also, during our introduction, we promise to discuss the upcoming mergers and acquisitions in 2021. Here you go!!!

Upcoming Mergers and Acquisitions 2021

Here is the list of upcoming mergers and acquisitions in 2021.

Mergers and Acquisitions Lawyers

Mergers and acquisitions lawyers can confirm that your merger or acquisition complies with the relevant state and federal laws that govern business transactions. A mergers and acquisitions lawyer will also help in deciding on the right structure for your deal, and draft. Also, they negotiate the terms of the transaction, get any third-party consent, and close the transaction.

Conclusion

In conclusion, the difference lies in how the transaction is related to the company’s board of directors, employees, and shareholders. However, Mergers and acquisitions lawyers ensure that your merger or acquisition complies with the relevant state and federal laws that govern business transactions.

Mergers and Acquisitions FAQ

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