Define the terms acquisition, takeover, merger and amalgamation

Banking & FinanceFinance ManagementGrowth & Empowerment

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.
raja
Published on 13-Jul-2021 12:55:33
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