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| Merger (company merger or acquisition) means one company acquiring another company assets in any method, as a result of the purchase, the second company lose the incorporation identity or its actual business activities changed. Incorporation merger methods included the following: |
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Debt bearing, means when the target company’s debt is equal to its value, the buyer takes the responsibility to bear all the target company’s debt as a condition for takeover all the target company’s business and assets. |
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Buyer takeover the target company by buying all its asset |
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Merger by absorbing the target company’s share. The owner of the target company uses the company asset to exchange the buyer company’s share and he/she then will be part of the shareholder of the buyer company. |
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Holding merger, the buyer company buy the target company’s share and become the holding company of the target company. |
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| Acquisition means the buyer purchase the target company shares and become the biggest shareholder. |
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| Combination (company combination) means two or more companies combine into one corporate according to agreement or ordinance. Company combination can be divided into two type, absorbing combination and innovative combination. Absorbing combination means when two or more companies combine together, one company absorb others and maintain their business under its company name. Innovative combination means two or more companies combine together and form a new company. |
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| Common points between merger, acquisition and combination |
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They have the same purpose that to control the company. |
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The above three are transaction of business. They are all business transaction, just different in the transaction method. |
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They are all business expansion and development activities. Through the external expansion strategy, company can improve it competition power, and overall economy power, this helps to improve company management level and overall profitability. |
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| Feature and difference between merger, acquisition and combination |
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For innovative combination, all involved parties will give up their corporate identity and reform all their business to form a brand new corporate. For absorbing merger, one company will takeover all the target company asset, and the target company will lose its corporate identity. So merger and combination will lead to giving up corporate identity of some or entity parties involve it. For acquisition, the buyer will purchase shares of the target company and become its biggest shareholder in order to get the ownership and decision right of the target company. The target company is still has its own corporate identity. |
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For combination, all involved parties will dissolve and form a new corporation, and all liability and responsibility will also directly forwards to the new company. For merger, no matter is debt bearing, takeover or absorbing merger will also forwards the liability and responsibility of the target company to buyer. While acquisition is only buying shares of the target company, same as other investor, they do not bear the debt of the target company. The maximum legal liability of them is the amount they invest into the company. |
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For combination and merger, as they have to bear the debt of the target company, as mentioned above, so they have to prepare a debt and asset list for creditor and investor of the target company. In order to protect creditor and investor benefit, merger and combination have to get approval in the shareholders meeting and prepare financial balancing for creditors. Creditors have the objection right to stop the merger or combination. The merger or combination can only take a step on if there is no objection from creditors for a specified period. Acquisition process is much easier, the buyer only has to purchase certain amount target company’s share in order to takeover the control of the company. Once they become the biggest shareholder, they have the right to call for shareholders meeting for electing new director broad and supervision broad. |
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For merger and acquisition, although the contract target is different, merger has to discuss with shareholder, and acquisition target is company, they only have to prepare target company asset balance sheet to carry on the process. However for combination there will be a more complicated process to go through, as combination is joining two or more companies to form a new company, so it has to calculate the value of all companies take part to allocate the new company shares before carrying on the combination. |
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Making use of business and overall evaluation detail, we can understand the situation of all parties involved and provide the best solution for you. |
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Base on our experience, we can reduce the potential cost and shorten the process, we can also help to encourage company culture reform. We can provide consulting service through the whole process, as parties want to maximized their own benefit, so dispute always occur, with an third parties as a consultant, the suggestion will be more fair. |
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| If you want to understand more about our merger and acquisition service, please contact our customer service hotline. |
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