Question

In: Accounting

Distinguish among a statutory merger, a statutory consolidation, and a stock acquisition.

Distinguish among a statutory merger, a statutory consolidation, and a stock acquisition.

Solutions

Expert Solution

A statutory merger is a business combination in which one of the combining entities continues to in existence as a legal entity .This treatment differs from the a statutory consolidation , where both the of merging entities are terminated and replace by a successor organization. A statutory merger is the same as an acquisition where one of the entities survives the transaction.

The basic difference between a statutory merger and a statutory consolidation are

1. in statutory consolidation where both the of merging entities are terminated and replace by a successor organization

in statutory merger one of the two parties retains its entity and another party merge into the other party by loosing its entity

2 in merger the assets and liabilities of the merging company become the property of the acquiring company

in consolidation the assets and liabilities of both the companies become the assets and liabilities of the larger that is formed after consolidation.

3. in both the merger and consolidation the federal and state government can stop the process of merger or consolidation by using anti-trust law if they find that merger or consolidation gets an unfair advantage over others or can affect the market by becoming a monopoly

in stock acquisition a buyer acquires a target company stock directly from the selling shareholders with the stock sale the buyer is assuming the ownership of both assets and liabilities including potential liabilities from past actions of the business. the buyer is merely stepping into the shoes of the previous owner and the business continues on. after the closing of the stock acquisition the target will continue as it existed prior to the acquisition with respect to its ownership of assets and liabilities

There is no merger or consolidation in stock acquisition this differs from the others


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