The state has established statutes and procedures to follow to complete a corporate merger. The board of directors for each corporation will craft and pass a resolution outlining the specifics of the corporations involved in the merger. This includes the names of the corporations, the name chosen for the proposed merged company, how the shares for both corporations will be converted, and other legal provisions.
The shareholders of each corporation are notified informing them of a meeting to approve the merger. If the specified number of shareholders agree, the directors sign and file the appropriate papers with the state. A certificate of the merger will be issued by the Secretary of State to authorize the new company. For corporation's in two different states, statutes often note that each corporation must follow the statutes for their respective state before the merger can be in effect.
Some statutes permit a corporation's directors to abandon the plan for a merger at any time leading up to the point where the final papers are filed with the state. Combining companies whose products have different seasonal patterns or respond differently to business cycles can result in more stable sales. The Philip Morris Company, now called Altria Group , started out in the tobacco industry but diversified as early as the s with the acquisition of Miller Brewing Company.
It diversified into the food industry with its subsequent purchase of General Foods , Kraft Foods , and Nabisco , among others. Later spinning off many businesses, current product categories include cigarettes, smokeless tobacco such as Copenhagen and Skoal, cigars, e-vapor products such as MarkTen, and wines. A specialized, financially motivated type of merger, the leveraged buyout LBO became popular in the s but is less common today. LBOs are corporate takeovers financed by large amounts of borrowed money—as much as 90 percent of the purchase price.
Often a belief that a company is worth more than the value of all its stock is what drives an LBO. They buy the stock and take the company private, expecting to increase cash flow by improving operating efficiency or selling off units for cash to pay off debt.
Although some LBOs do improve efficiency, many do not live up to investor expectations or generate enough cash to pay their debt.
The goal is often strategic: to improve overall performance of the merged firms through cost savings, elimination of overlapping operations, improved purchasing power, increased market share, or reduced competition. Oracle Corp. Company growth, broadening product lines, acquiring technology or management skills, and the ability to quickly acquire new markets are other motives for acquiring a company.
Yahoo Inc. Purchasing a company can also offer a faster, less risky, less costly option than developing products or markets in-house or expanding internationally. In addition to the new product market, this move offers Amazon opportunity to sell Amazon tech products in the grocery stores as well as access to an entirely new set of data on consumers.
Another motive for acquisitions is financial restructuring—cutting costs, selling off units, laying off employees, and refinancing the company to increase its value to stockholders.
Most financially motivated mergers involve larger companies. Eagle Bancshares is headquartered at Atlanta, Georgia and has workers. Eagle Bancshares also holds the Tucker Federal Bank, which is one of the ten biggest banks in the metropolitan Atlanta region as far as deposit market share is concerned. One of the major benefits of this acquisition is that this acquisition enables the RBC to go ahead with its growth operations in the North American market.
With the help of this acquisition RBC has got a chance to deal in the financial market of Atlanta , which is among the leading upcoming financial markets in the USA.
This move would allow RBC to diversify its base of operations. A product extension merger takes place between two business organizations that deal in products that are related to each other and operate in the same market.
The product extension merger allows the merging companies to group together their products and get access to a bigger set of consumers. This ensures that they earn higher profits. The acquisition of Mobilink Telecom Inc. Broadcom deals in the manufacturing Bluetooth personal area network hardware systems and chips for IEEE Mobilink Telecom Inc. It is also in the process of being certified to produce wireless networking chips that have high speed and General Packet Radio Service technology.
It is expected that the products of Mobilink Telecom Inc. A merger between two companies producing different goods or services for one specific finished product. Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy.
Compare Accounts. The offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace. Acquisition An acquisition is a corporate action in which one company purchases most or all of another company's shares to gain control of that company. Brexit Brexit refers to the U.
Friendly Takeover Definition A friendly takeover occurs when a target company's management and board of directors agree to a merger or acquisition proposal by another company. Clayton Antitrust Act The Clayton Antitrust Act is designed to promote business competition and prevent the formation of monopolies and other unethical business practices. Partner Links. Related Articles.
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