Merger

A merger can be defined as the absorption of the interest of another company or entity. This process can include an estate, contract, or other elements of business.

There are no specific rules or formats for a union in general both in the United States or other countries.

Mergers are purely a method of combining two or more organizations, business concerns, or other related interests.

The terms of a merger are generally orchestrated by agreement of the parties involved.

In the financial space, a merger refers to an agreement between two or more companies or corporations, public and private, to merge into one entity.

Mergers differ from acquisitions, in which the buyer absorbs all the assets and liabilities of another. A purchase does not necessarily have to be friendly and can be hostile.

One business or venture could simply buy up enough shares of a corporation to control it without the consent of its previous controllers, whereas a merger is typically achieved by an understanding.

A merger is typically a decision by two companies to combine all operations, officers, structure, and other functions of the business.

How Do Companies Benefit from Mergers?

Mergers are meant to be mutually beneficial for the parties involved. In the case of two publicly-traded companies, a merger usually involves one company giving shareholders in the other its stock in exchange for surrendering the stock of the first company.

Mergers can have both abrupt and sizable implications on share prices. Following a merger, the acquiring company continues to function, while the acquired company ceases to exist.

This does not mean that the brand disappears however.

An example is when Kmart Holdings and Sears merged in 2004. Both corporations announced combining Sears and Kmart into a significant new retail company named Sears Holdings Corporation.

Sears Holdings at the time of writing is the United States’ third-largest retailer, with approximately $55 billion in annual revenues and a national footprint of nearly 3,500 retail stores in the country.

Both Kmart and Sears stores continued to operate under their brand names and identities. Kmart and Sears shareholders each approved the combination.

News surrounding mergers often helps move company share prices, even if these prove to be rumors only.