A merger is defined as the absorption of the interest of another. It can include an estate, or contract. There are no specific rules or formats for a union in general.
It is a method of combining two or more organizations, business concerns, or other related interests. The terms of a merger are usually by agreement of the parties involved.
In the financial sphere, merger refers to an agreement between two or more companies or corporations, public and private, to merge into one entity.
Mergers differ from acquisitions, where the buy absorbed all the assets and liabilities of another. A purchase does not necessarily have to be friendly.
One business or venture could simply buy up enough shares of a corporation to control it without the consent of its previous controllers, whereas a merger is usually by understanding.
A merger is usually a decision by two companies to combine all operations, officers, structure, and other functions of the business.
Who Benefits from Mergers?
Mergers are meant to be mutually beneficial for the parties involved. In the case of two publicly-traded companies, a merger usually involves one company giving shareholders in the other its stock in exchange for surrendering the stock of the first company.
The acquiring company continues to function, and the acquired company ceases to exist. This does not mean that the brand disappears.
An example is when Kmart Holdings and Sears merged in 2004. The two corporations announced the combining Sears and Kmart into a significant new retail company named Sears Holdings Corporation.
Sears Holdings is the nation's third-largest retailer, with approximately $55 billion in annual revenues and a national footprint of nearly 3,500 retail stores in the United States.
Both Kmart and Sears stores continued to operate under their brand names and identities. Kmart and Sears shareholders each approved the combination.