To get to the basics right, here is a short definition:
Merger: a merger occurs when two separate entities combine to create a new, joint organization.
Acquisition: an acquisition refers to the takeover of one entity by another.
Mergers and acquisitions may be completed to expand a company’s reach or gain market share in an attempt to create shareholder value.
To get into any merger/acquisition, the following has to be done:
The board of directors for each company must initially pass a resolution adopting a plan of merger/acquisition that specifies –
The names of the companies that are involved
The name of the proposed merged company
The manner of converting shares of both companies
Any other legal provision to which the companies agree
Each company notifies all of its shareholders that a meeting will be held to approve the merger.
If the proper number of shareholders approves the plan, the directors sign the papers and file them with the state.
The secretary of state issues a certificate of merger to authorize the new company.
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