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Finance: What's the difference between mergers and acquisitions? 22 Views

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Description:

In a merger, the boards and shareholders of both companies must both vote in favor of the action, and the post merger acquiring company will often include executive management from both companies in some capacity. In the case of an acquisition, the acquiring company gets a majority stake in the target company and then it becomes either a wholly owned subsidiary and otherwise retains its corporate structure, or its assets get stripped out with desirable ones retained and others discarded and sold.

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Transcript

00:00
Finance allah shmoop what's the difference between mergers and acquisitions
00:08
all right people listen up Merger that's what's about to
00:11
happen here it's a merger acquisition that's what's about to
00:16
happen here Corporate america is kind of same thing when
00:20
two companies merge while they generally you know attracted to

00:24
each other hopefully respect each other they share stock or
00:28
combined the stocks of each side and you know combine
00:32
efforts and then and then cuddle afterwards if they're successful
00:36
at the merger than the combination of two roughly equals
00:39
yields more than the one plus one combo that made
00:43
them so two companies get together on generally equal ish
00:46
footing In that case acquisitions are a combining more like
00:51
that eating thing on much different footing The large company
00:55
eats or buys the target either using its more highly
00:59
valued stock currency or it's taft to do so Well
01:02
why would a company acquire another Well the target might
01:05
have one hundred employees ninety of whom can be fired
01:08
with massive expense savings after the acquisition For the acquirer
01:12
such that economically the acquisition won't just makes a whole
01:15
lot of financial sense acquisitions happen for market power reasons
01:19
As well like imagine the negotiating leverage that amazon would
01:23
have if it bought the next five biggest online retailers
01:27
Or maybe it'll just kill them Probably not legal for
01:29
them to buy him anyway given the monopoly like dominance
01:32
of amazon these days But wow that would be a
01:34
powerful set of acquisitions And that would be a good
01:37
reason for ems on to acquire a whole bunch Things
01:39
and bezos would grow even more powerful maybe too powerful
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