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Mergers and Acquisitions Key Concepts



A merger is the process by which two companies unite their businesses, often in order to perform at multinational level. There are many different reasons why companies would want to merge their businesses, such as to extend their market or their range of products. In certain cases a customer or supplier would like to join forces and provide both the product and the supply in the same business. More commonly, the idea of merger will be used by companies with similar businesses. However, a merger can be made between two totally different businesses. This is also known as a conglomeration.

In general, mergers are proposed by large companies that want to expand their business and become transnational. Usually, the two companies will form a new company where their businesses will be transferred. The stockholders in of the merged companies will swap their current stockholding for stock in the newly formed company.

The nature of the transaction is complicated and involves compliance with through rules and regulations. These are also known as mergers and acquisitions regulations or M&A regulations. The scope is the protection of the investor public and stockholders, and transparency of the transactions is scrutinized.

M&A regulations help to improve the harmonization and homogenization of international markets and to protect against fraud.

Mergers require intensive planning and specialist legal, tax, and business advice, and, as a result, they can be very expensive.

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