The combination of two or more companies in which only one firm survives as the legal entity.
An acquisition occurs when one company acquires another as part of its overall business strategy.
Some of the synergies of a business combination are the economies realized where the performance of the combined firm exceeds that of its previously separate parts. There are economics of scale where the benefits of size cause the average unit cost to falls as volume increases. Acquisitions can increase sales, market share, or help a company gain market dominance. There may be other marketing and strategic benefits, or the acquisition might bring technological advance to the product table, or it may fill a gap in the product line, which would enhance sales made throughout the firm. It may be possible for duplicate facilities to be eliminated after a merger or departments like marketing, accounting, purchasing, and other operations can be consolidated. The sales force may be reduced to avoid duplication of effort in a particular territory. The companies may be able to concentrate a greater volume of activity into a given facility and into a given number of people to have a more efficient utilization of resources.
A form of divestiture resulting in a subsidiary or division becoming an independent company. Ordinarily, shares in the new company are distributed to the parent company’s shareholders on a pro-rata bases.
A public sale of stock in a subsidiary in which the parent usually retains majority control.
- Chapter 7:
- which is liquidation, or the sale of assets of a firm.
- Chapter 11:
- which is rehabilitation of an enterprise through its reorganization.