An acquisition occurs when one company takes over controlling interest in another company. This strategy is often employed to achieve specific business objectives such as expanding market share, gaining new technologies, or reducing competition.
Amalgamation is the combination of two or more companies into a single entity, either by acquisition, merging, or dissolution and reconstitution as a new company.
A person or firm that makes an unwelcome takeover bid for a company, often hostile and unsolicited.
In corporate acquisitions, a bust-up acquisition is a strategy where a raider sells some of the acquired company's assets to finance the leveraged acquisition.
The purchase of a holding of more than 50% in a company by (or on behalf of) a group of executives from outside the company who wish to run the company.
A C-type reorganization, also known as a stock-for-assets reorganization, is a type of corporate restructuring defined under the Internal Revenue Code (IRC) section 368(a)(1)(C). This specific type of merger involves the acquisition by one corporation of substantially all of the properties of another corporation solely in exchange for all or a part of its voting stock.
A conglomerate is a large corporation formed by the merger or acquisition of smaller companies, each operating in distinct, often unrelated, industries. This structure is typically chosen to diversify risk and achieve financial stability across various market sectors.
A Contingent Agreement is a contract arrangement in which certain obligations depend on the occurrence of a particular event. These agreements often come into play during mergers and acquisitions, real estate transactions, and litigation settlements.
Contingent consideration refers to a payment made as part of a business acquisition that is contingent on future events. This concept is commonly used in earn-out agreements.
A contingent contract is a legal agreement that becomes enforceable only upon the occurrence or non-occurrence of a specific event. This form of agreement is commonly used in various business transactions, including mergers and acquisitions.
A corporate acquisition involves one company purchasing most or all of another company's shares to gain control of that company, which can lead to significant structural and operational changes.
A Crown Jewel Option is a defensive strategy used by companies to prevent hostile takeovers by giving a partner or friendly company the right to buy some of its best assets at a favorable price if a takeover were successful.
In corporate mergers and acquisitions, the term 'crown jewels' refers to the target company's most desirable and valuable properties. The disposal or sale of these assets can significantly reduce the company's overall value and attractiveness as a candidate for takeover.
A defended takeover bid refers to an acquisition attempt where the directors of the target company actively oppose the bid, employing various defenses to prevent the takeover.
A contract ensuring payment of the agreed consideration at a later date or upon the occurrence of a specified event.
An Earn-Out is a financial agreement used in mergers and acquisitions (M&A) where supplementary purchase payments are made to the seller contingent upon the acquired company achieving certain future financial goals, typically based on earnings, revenues, or other performance metrics.
A provision in an executive's employment contract that promises substantial severance packages if the individual is terminated or chooses to leave following a change in company ownership or a takeover.
In a corporate takeover battle, a Grey Knight is a counterbidder whose intentions are not clearly defined, creating uncertainty for the target company.
A horizontal combination occurs when two or more companies operating at the same level in an industry merge to form a larger entity. It is similar to a horizontal merger.
Horizontal integration refers to the strategy where a company acquires, merges, or takes over another company operating at the same level of the value chain in the same industry. The primary aim is to reduce competition, increase market share, and achieve economies of scale.
A horizontal merger involves the merging of companies with similar functions in the production or sale of comparable products. It is often scrutinized for its potential anticompetitive impacts.
A hostile bid is an attempt to acquire a company without the approval of the company's board of directors. Unlike an agreed bid, a hostile bid is unsolicited and can be seen as unfriendly by the target company.
Identifiable assets and liabilities, also known as separable assets and liabilities, are those parts of a business that can be disposed of separately without having to dispose of the entire business. They play a crucial role in financial accounting and business valuation.
Investment banks play a pivotal role in the financial markets by advising on mergers and acquisitions, underwriting new securities, and often trading securities for their own accounts. They differ from commercial banks, focusing on capital creation for corporations and other entities.
Investment banking encompasses a range of financial services focused on serving large corporations, public bodies, and investors, distinguishing itself from retail or commercial banking by not directly involving individual depositors.
A Letter of Intent (LOI) is a document outlining an agreement between two or more parties before the agreement is finalized. It is commonly used in business transactions such as mergers, acquisitions, and partnerships.
An in-depth exploration of leveraged buyouts, including definitions, examples, related terms, frequently asked questions, and resources for further study.
A leveraged buyout (LBO) is a financial transaction where a company is acquired primarily using borrowed funds, with the target company's assets often used as collateral for the loans.
A lock-up option is a defensive strategy used in corporate takeovers, granting a friendly suitor the option to acquire valuable assets or shares (referred to as 'crown jewels') of a target company in the presence of a hostile takeover attempt.
The term 'merge' has dual meanings in both data management and corporate finance. In the context of data management, merging refers to combining multiple lists or files by consolidating duplicate records into single records. In corporate finance, merging refers to the financial consolidation of two companies where only one company survives as a legal entity.
Negative goodwill occurs when the purchase price of an acquired company is less than the fair value of its net identifiable assets and liabilities, leading to gains in financial statements.
Corporate securities that do not empower a holder to vote on corporate resolutions or the election of directors. Commonly issued during takeovers to dilute equity and discourage mergers.
Pooling of interests was an accounting method, previously utilized in mergers and acquisitions, allowing the combining of companies' balance sheets by line item additions of their assets and liabilities.
The pooling-of-interests method was an accounting approach previously used in business combinations in the USA, reflecting the continuation of the acquired company's accounts at book value.
Pre-acquisition profits refer to retained earnings accumulated by a company before it is acquired by another entity. These profits are not to be distributed to the shareholders of the acquiring company as dividends, as they represent a recovery of the cost of investment rather than income.
Purchased Goodwill represents the premium amount paid over the fair value of the identifiable net assets during the acquisition of a company, reflecting the value of the company’s brand, customer base, and other intangible elements.
Push Down Accounting refers to the practice in the USA of incorporating the fair value adjustments on acquisition, including goodwill, made by the acquiring company into the financial statements of the acquired subsidiary.
A raider is an individual or organization that seeks to take over a company, often through aggressive strategies and hostile takeover bids, to capitalize on undervalued assets.
Risk Arbitrage, also known as takeover arbitrage, is a strategy involving the simultaneous purchase of stock in a company being acquired and the sale of stock in its proposed acquirer.
A corporate strategy used to avoid a hostile takeover by disposing of valuable assets, often resulting in a significant decline in the company's value and earnings power.
Separable assets and liabilities refer to the specific assets and liabilities of a business that can be clearly distinguished from other assets and liabilities. This distinction is crucial when assessing the financial health of a company or when conducting valuations, such as during a merger or acquisition.
A firm specializing in the early detection of takeover activities, monitoring trading patterns in a client's stock to identify parties accumulating shares.
A potential target that has not yet been approached by an acquirer. Such a company usually has particularly attractive features, such as a large amount of cash or under-valued real estate or other assets.
A statutory merger refers to the legal combination of two or more corporations in which only one corporation survives as a legal entity, with all others ceasing to exist.
Stock-for-asset reorganization is a form of corporate restructuring where an acquiring corporation exchanges its voting stock (or its parent's voting stock) for substantially all of the assets of another corporation.
A form of reorganization where one corporation acquires at least 80% of another corporation's stock in exchange solely for all or part of its own (or its parent's) voting stock, transforming the acquired corporation into a subsidiary.
Synergy describes the added value created by merging two separate firms, leading to a greater return than the sum of their individual contributions. This enhanced return is typically anticipated during merger or takeover activities.
The Takeover Panel, also known historically as the City Code on Takeovers and Mergers, provides the regulatory framework dedicated to overseeing corporate acquisitions and mergers, ensuring fair treatment of shareholders and maintaining confidence in the UK financial markets.
A tender offer is a public proposal made to shareholders of a particular corporation to purchase a specified number of shares at a predetermined price. The offer generally contains specific conditions, such as the requirement that the offeror must obtain the total number of shares specified in the tender to proceed.
A vendor placing is a strategic financial maneuver used for acquiring another company or business, involving the placement of issued shares with prearranged investors as an alternative to direct cash transactions.
In corporate finance, a white knight refers to a person or firm that makes a welcomed takeover bid for a company on improved terms, aiming to replace an unacceptable and unwelcome bid from another party, known as a black knight. This tactic helps the target company to find a more suitable and favorable owner.
