A business merger is a strategic move that combines two separate legal entities into one new company. The benefits of a business merger can include increased profitability, greater market share, expanded resources, reduced overhead costs, and improved competitive advantages. However, mergers can also be risky. They can be complicated to implement and can bring about mismatched cultures, technology, and objectives. Employees and suppliers may be resistant to the change, which can result in a difficult transition. And there are often regulatory concerns, such as antitrust issues.
A merger can involve either a takeover or an amalgamation. A takeover involves the acquiring company buying out the existing shareholders in the target company. The acquiring company can buy the entire target company, or it can structure the transaction as an asset purchase in which it only buys the target’s assets and leaves behind its liabilities. This is sometimes used in acquisitions of technology companies where a buyer wants to cherry-pick the best parts of the target’s technology without taking on its liabilities.
An amalgamation is a merger in which the businesses involved are of equal size and value. The resulting company is often restructured to take advantage of synergies. A famous example is the 1999 merger of Exxon and Mobil to form the world’s largest oil and gas producer.
Acquisitions are more common than amalgamations. They can occur in both domestic and foreign markets. Acquiring companies can often leverage the local knowledge of foreign markets and the distribution networks of target companies to accelerate their entry into those markets.
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