Question

1. When companies want to expand, they may buy or invest in another corporation by merging or consolidation.

a.Describe what happens when a company merges with another company.

b. Describe what happens when a consolidation occurs.

2. What is a conglomerate corporation?

3. Describe Asset Acquisition.

4. What is a stock acquisition and what happens to the corporation?

Answer 1

a. A merger happens when a company combine with another company operations in a way that share value of combining company increases.

Two companies will make an contract for one company to buy another company’s share from the share holder in exchange of its own share. In some cases some other payment is used to pay foe the transaction of equity such as cash, assets, usually the most common transactions are stock for stock.

b. In business terms, consolidation happens when two or more companies combine to make a new company with the goal of increasing the market share and profitability by taking the benefit of talent, industry exprience and technology.

It is also termed as amalgamation, consolidation can result to creation of a new company or subsidiary of a large company/business. This make two companies into one co-operative business.A consolidation differ from a merger, the consolidated companies may result in a new business, whereas in a merger, one company absorbs the other company and remains in existence while the other is dissolved.

Conglomerate Corporation - A conglomerate is a corporation made up from different, unlikely unrelated businesses. In a conglomerate, one entity owns a controlling stake(shares) in a number of smaller companies which conduct business separately.Conglomerates are large entities/companies that are made up of independent companies that operate in multiple industries.

Asset Acquisition - An asset acquisition is the purchase of an entity by buying its assets instead of its share. In most part, an asset acquisition t involves an assumption of certain liabilities. Although, because the parties can bargain over which assets will be acquired and which liabilities will be assumed, the transaction can be far more flexible in its structure and outcome than a merger, combination, or share purchase.

Stock Acquisition - In a stock acquisition, a buyer acquires a target company’s share directly from the selling stockholders. With a stock sale, the buyer is assuming ownership of both assets and liabilities – including the liabilities from past actions of the business. The buyer takes place of the previous owner and the business continues on.

After the closing of the stock acquisition, the corporation will still continue as it existed prior to the acquisition with respect to its ownership of assets and liabilities.