Companies go out of business. It's part of the capitalist life cycle. If a business can't compete for whatever reason, it slips into oblivion, making room for other firms to pop up. (Cue: "Circle of Life" from the Lion King.)
But sometimes these failures come with complications. This is especially true for banks. Because banks sit at the center of the flow of capital, and because people and other businesses rely on banks to keep their money safe and warm, a bank failure can cause a dramatic ripple effect.
So there's a sizable regulatory structure in place to avoid any negative repercussions from bank failures. One of the devices used by regulators to sidestep the fall out of a bank going out of business is an assisted merger.
Basically, in an assisted merger, regulators help a failing bank find another bank to merge with. In the U.S., these actions are spearheaded by the Federal Deposit Insurance Corporation, or FDIC, the same people who guarantee bank deposits. Because the FDIC is on the hook for any deposit claims if a bank fails, Congress gave the organization the ability to avoid failures through an assisted merger process. If a dangerous situation comes up at an FDIC member bank, the regulator can help facilitate a transaction to move assets to a more stable institution.
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Finance: What's the difference between m...22 Views
Finance allah shmoop what's the difference between mergers and acquisitions
all right people listen up Merger that's what's about to
happen here it's a merger acquisition that's what's about to
happen here Corporate america is kind of same thing when
two companies merge while they generally you know attracted to
each other hopefully respect each other they share stock or
combined the stocks of each side and you know combine
efforts and then and then cuddle afterwards if they're successful
at the merger than the combination of two roughly equals
yields more than the one plus one combo that made
them so two companies get together on generally equal ish
footing In that case acquisitions are a combining more like
that eating thing on much different footing The large company
eats or buys the target either using its more highly
valued stock currency or it's taft to do so Well
why would a company acquire another Well the target might
have one hundred employees ninety of whom can be fired
with massive expense savings after the acquisition For the acquirer
such that economically the acquisition won't just makes a whole
lot of financial sense acquisitions happen for market power reasons
As well like imagine the negotiating leverage that amazon would
have if it bought the next five biggest online retailers
Or maybe it'll just kill them Probably not legal for
them to buy him anyway given the monopoly like dominance
of amazon these days But wow that would be a
powerful set of acquisitions And that would be a good
reason for ems on to acquire a whole bunch Things
and bezos would grow even more powerful maybe too powerful
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