Like a Pac-Man video game, a business consolidation involves the merger or acquisition of two or more small companies into a larger one. It can also refer to merging divisions within the same company.
The benefits of having the, uh...urge to merge...are that you may not need as many employees in purchasing, human resources, accounting, or other administrative functions.
Another advantage is that the new company might be able to obtain less expensive loans, since it now has more assets to put up as collateral. They will also now have a larger customer base, better geographic coverage, and perhaps lower prices from suppliers. Or...the acquiring company could just liquidate the assets of the company they are buying in order to eliminate a competitor, such as the big oil companies buying up solar power companies.
During the 1980s, major acquisitions seemed to happen on an almost daily basis, when investment banking companies would use the cash from the company they were buying in order to make the purchase, known as a leveraged buyout.
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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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