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Chapter 11: Q. 11 (page 272)

What is a corporate merger? What is an acquisition?

Short Answer

Expert verified

A corporate merger is when two or more companies merge, and acquisition is when one company buys another.

Step by step solution

01

Definition

Mergers and acquisitions are frequently used to boost shareholder value by expanding a company's presence or gaining business strength.

02

Explanation

A corporate merger occurs when two different businesses come together and merge to form a single entity. A merger is the coming together of two formerly independent businesses to establish a new legal entity.

In an acquisition, the acquiring company acquires majority ownership in the target company (also known as the acquired firm), but does not change its name or organizational structure. The names and organizational structures of both the acquiring and acquired enterprises are usually preserved.

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