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Distinctions between mergers and acquisitions

by | Nov 22, 2021 | Mergers and Acquisitions

Knowing the differences between mergers and acquisitions can reveal the pros and cons of each. In a merger, two businesses combine as their agreement. Their resulting group is formed as a mutual outcome. The term “acquisition,” however, has two connotations with it in New York. An acquisition is when a business is specifically acquired through a purchase. Acquisitions can occur with friendly or hostile tones and are inescapable in some cases.

A friendly acquisition

Like a merger, an acquisition is negotiated, but the difference between the two is regarding what kind of negotiations happen. It’s not degrading for one business to buy the other. Having an agreement with shareholders is an example of a friendly deal. In such cases, the parties of interest can vote. Likewise, it’s friendly when two businesses in a merger have both negotiated the deal together.

A hostile move

A hostile condition is one where the target company refuses a purchase offer by an acquirer. Even if shareholders agree to a price offer for their stocks, the acquirer could force executive management out. Hostile takeovers can be the result of an acquirer strategically working to replace board members. Some acquisitions call for the disruption of internal cultures.

The reverse takeover

A private company that buys a public one does a reverse takeover. The reversal makes a private company public. Business owners rely on this as a way of going public without an IPO. In normal circumstances, an initial public offering is costly and laden with unseen risks.

Mergers and acquisitions in New York

Understanding how mergers and acquisitions work gives you a better idea of how one benefits you over the other. Speaking with a certified accountant is another step in getting more clarity. The more you can foresee regarding a merger or acquisition, the smoother yours can play out.