Question

Distinguish between mergers, acquisitions, and takeovers. Be prepared to apply each. with real world example

Answer 1

Based on the differences between the three we can explain them by:-

Merger

A merger is a strategic action taken between two firms that combine their business capacity in order to deal with the competition in the market, or, in order to create a better standing in the present one.

Eg. Disney and Pixar can be thought of as a merger, in order to combine their operations to create better products.

Acquisition

An acquisition can be defined as the action which usually starts with a merger but end up in becoming the case where one company acquires the majority shares in another, thereby absorbing the company as its own secondary subsidiary portfolio.

Eg. Microsoft acquired Skype following an acquisition structure.

Takeover

A takeover is an extreme case of acquisition in which the controlling company doesn't even consider the acquired firms bidding. Takeover as usually hostile.

Eg. Friends life had a takeover by Aviva.