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Mergers and Takeovers

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Mergers and Takeovers by Cristina Nuta -

In a market economy it is quite common that small companies, with reduced financial means, should be taken over by other companies or that two or several companies should merge to form a new company.

A buy out means the purchasing of a company, either entirely, or at least the controlling percentage of its shares. In the case of small companies with limited assets, in order to make a takeover bid, that company will have to borrow heavily to finance the takeover of a larger company. For this they might use both their own assets of the target company of junk bonds as security or collateral for getting the loan. Such a takeover is called a leveraged buy out.

A takeover bid is an offer to buy made to the shareholders of the target company. The purpose of the takeove r is to add that company to their portfolio and turn it into a subsidiary. The bid may be for payment in cash made to the shareholders (cash bid) or for payment by shares of the company making the bid. Sometimes the bid is considered acceptable by the board of the target company and in this case it is said to be a welcome/friendly takeover bid. In other instances it is considered unfavourable by the board of the target company and then it is termed an unfriendly/hostile bid. In the latter case a takeover battle ensues in which the bidder might offer better terms or another bidder comes into the field

A merger is the unifying of two or several companies into a new one with the purpose of increasing battle, of doing away with competition. It is usually to the advantage of all parties involved, hence it is considered amicable. All members of the former boards are offered almost similar positions in the new board. Another term for this type of merger is amalgamation.

Therefore, for the ones who want to start a business but don't have too much knowledge in the field, they should take into consideration the information above and, apart from this, they should also think positive that they will be lucky in their business.
Mergers and Takeovers written by Cristina Nuta for FamousWhy.com
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Tags: merge, takeover, company, business, economy, market



Category: Business Articles  - ( Business Articles Archive)

Date Added: 31 July '07


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