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Financial and strategic implications of mergers and acquisitions

Introduction to mergers and

acquisitions

1.1 Terminology

Merger – the joining together of two or more entities, where the entities
join together to submerge their separate identities into a new entity.

Acquisition/takeover – when one entity acquires a majority
shareholding in another and (usually) submerges the identity of the
acquired entity into its own.

The term ‘merger’ is often used even when an acquisition/takeover has
actually occurred – sounds more like a partnership between equals.

Three classifications of merger/acquisition:

Horizontal integration Vertical integration Conglomerate

Two entities in the The acquisition of one When two entities in

same line of business entity by another at a unrelated businesses
combine. different level in the combine.
supply chain.
e.g. recent bank and
building society e.g. UK breweries have
mergers. moved heavily into the
distribution of their
product via public
houses.

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