A business merger is a legally sanctioned consolidation of two or more companies into one entity. This type of transaction generally involves two companies that are similar in size and scope. Assets and liabilities are combined, and a new corporate leadership team is set up to oversee the operations of the newly created company. The stocks of the original companies are usually retired and replaced with shares in the acquiring company.
While a business merger may sound straightforward, it’s important to work with an experienced professional. A good merger and acquisition specialist will help to facilitate the process and guide you through any legal or financial requirements that must be met in order to complete the deal. A lawyer can also provide guidance in determining the best strategy for your specific situation.
Mergers are typically done in order to achieve economies of scale, which means that the larger a company becomes, the lower its operating costs become. They can also be used to gain market share, reduce competitive threats and expand into new markets. A common type of business merger is a horizontal merger, which occurs when companies that sell the same products merge together. This is often done to increase market coverage, such as the recent merger of T-Mobile and Sprint. Another common type of business merger is a vertical merger, which occurs when companies that offer different products or services merge together. For example, the merger of Eagle Bancshares and RBC Centura.