Define the terms acquisition, takeover, merger and amalgamation

The terms acquisition, takeover, merger and amalgamation are explained below −

Acquisition

• Acquisition is a purchase of more than 50% shares/stake of another company.
• Payments can be made in either cash or stock or by both.
• Friendly approaches or hostile approaches are used in acquisition.
• Friendly approach means Boards of directors support the acquisition.
• Hostile approach means Boards of directors will not support the acquisition.

Takeover

• Takeover is transfer/control interest of a company either by friendly or hostile approach.
• Generally, takeover is done by bigger companies.
• It can be done in straight, ownership capture, revival and bailout.

Merger

• Upon approval of management and shareholders (in case of public companies), two companies combine to form a single company.
• After merger, both companies' operations, shares and all the business activities are carried out under a single roof.
• Merger is a tax-free transaction.

Amalgamation

• Amalgamation is a legal process, in which two or more companies are absorbed/blended.
• Companies combine to form a new entity and for the diversification or expansion of activities/services.