Combination

  

Categories: Entrepreneur, Investing

Like a marriage for corporations (stretching the metaphor a bit: moving in together would be a jointly-owned collaboration, dating would be a strategic partnership, and the Tinder equivalent would be seeing the other company's stock price and saying "Hmmm...there's some value there").

A combination, or merger, occurs when two companies agree to become one. The structure of the get-together can vary from deal to deal. In some cases, a large company takes over a smaller company. This is typically called an acquisition. In other cases, two relatively similar-sized companies decide to combine. This is generally called a merger, though it is sometimes specified as "a merger of equals" if the organizations are of roughly equal valuation.

These deals are often conducted as a stock swap, meaning that the shareholders of the separate companies become shareholders in the new, bigger firm.

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Finance: What's the difference between m...22 Views

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Finance allah shmoop what's the difference between mergers and acquisitions

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all right people listen up Merger that's what's about to

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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

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two companies merge while they generally you know attracted to

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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

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valued stock currency or it's taft to do so Well

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why would a company acquire another Well the target might

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have one hundred employees ninety of whom can be fired

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with massive expense savings after the acquisition For the acquirer

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such that economically the acquisition won't just makes a whole

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lot of financial sense acquisitions happen for market power reasons

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As well like imagine the negotiating leverage that amazon would

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have if it bought the next five biggest online retailers

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Or maybe it'll just kill them Probably not legal for

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them to buy him anyway given the monopoly like dominance

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of amazon these days But wow that would be a

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powerful set of acquisitions And that would be a good

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reason for ems on to acquire a whole bunch Things

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and bezos would grow even more powerful maybe too powerful

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