Formation of merger
Concept of Merger and Acquisition in Agribusiness is essential for Financial Manager. There are three fundamental legal procedures that can be used by one firm to acquire another company:
- Merger or consolidation
- Stock acquisition
- Asset acquisition.
The company that acquires another company is called the bidder, and the company that is purchased is called the target company.
Merger or Consolidation
A combination of companies may take the form of either a merger or consolidation.
- A merger is characterized as a combination of two or more firms in which the identity of the acquiring firm is retained by the resulting firm.
- Two or more businesses are merged in a restructuring to create a single company. When the companies are of similar size and market strength, restructuring might be used.
- A merger is a full absorption of one corporation by another, in which the merging company maintains its name and as a separate entity, the acquired company ceases to exist.
Types of merger
Before going to invest, the Concept of Merger and Acquisition in Agribusiness is essential. Four forms of mergers can be defined as:
- Horizontal Merger
A horizontal merger happens when in the same line of business, i.e. manufacturing the same commodity, one corporation combines with another. A bank may take the form of a merger with another bank, for example.
- Vertical merger
A vertical merger happens when one of its suppliers is purchased by a manufacturer.
- Congeneric Merger
It includes related companies but not producers in a producer-supplier relationship (vertical) of the same product (horizontal) or the business.
- Merger of Conglomerate
A Conglomerate merger happens when a new business company is incorporated into unrelated entities.
Stock acquisition
A second way to purchase another company is to simply buy the voting stock of the company through an exchange of cash, stock shares, or other securities. A tender offer will do this. A tender offer is a public offer by one company to buy the shares of another firm directly.
Asset Acquisition
By purchasing any or all of its properties, a company may absorb another company. It does the same thing as purchasing the company.
Acquisition Types
Below are the main forms of acquisition:
- Acquisition Horizontal
This is the buying of a company in the same field as the bidder.
- Acquisition in Vertical
A vertical acquisition includes companies at various stages of the manufacturing process. The purchase of a travel agency by an airline corporation will be a vertical purchase.
- Acquisition by Conglomerate
If the bidder and the target business are not related to each other, the transaction is considered an acquisition of a conglomerate.
Takeover
A takeover is a general and imprecise term referring to the transition from one group of shareholders to another of ownership of a company.
So, A business firm especially an agribusiness firm should have the Concept of Merger and Acquisition in Agribusiness.
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