The basics of Mergers and Acquisitions

The corporate finance industry is hugely benefited by the two combining processes, namely, mergers and acquisitions. They are categorized as combining processes because they allow the coming together of two or more companies or organizations for the purpose of creating a larger corporate entity, and the resultant increased profits.

Merger refers to the process of the combining of two or more companies based on mutual consent, while the process of acquisition refers to the taking over of one company by another company. Amit Raizada is the Chief Executive Officer at SBV or Spectrum Business Ventures based in Kansas City, Missouri. He has been in this profession for a very long time and hence has the experience to competently lead M&As, deal sourcing, and other financial issues of a company.

A merger may be of three types based on the nature of the merger – the horizontal, the vertical and the conglomerate merger. Based on the way it is financed, it can be categorized as purchased merger or consolidation merger. On the other hand an acquisition is a corporate combining process whereby, one company takes over another company. This is usually carried out by a larger firm taking over a smaller firm, either by purchasing its shares from its shareholders or by purchasing some of the seller company’s assets.

These two processes are rather appealing to most business owners because of the kind of enhancement and increase in the value of the company’s stocks. The corporate taxes are often greatly affected too, by these processes when one business merges with another successful business enterprise. The basic reason behind a merger is to earn better profits.

One of the reasons that larger companies wish to take over a smaller company is because of its recognition in the corporate world. When a small company has excellent customer database, technological innovations and distribution channels but cannot expand due to lack of funds and contacts, this is when a merger becomes helpful. In fact, it is particularly under these circumstances that a larger business entity gets interested in a smaller one.

Be it a merger or an acquisition both the parties involved in the process are highly benefitted through it, although there are reported cases of ‘hostile takeovers’. A hostile takeover occurs when one company ( in most cases a corporate entity), forcibly takes over another company against their will. This is initiated when the stock market is used as a means to offer the stocks of a business.

Experts, who can help give you a clear insight as to how to carry out a merger or an acquisition, like Amit Raizada , will be able to tell you that more often than not both these corporate combining process are an excellent way to increase your company’s profits vastly. Of course, if the process is carried out in a friendly manner. But the termination or elimination of certain posts comes as a by product of these processes, for which one should be prepared. It is the kind of merger that defines the changes that may take place within the company.

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