Merger and acquisition –are two main words that are most misunderstood in the business industry. Both these terms depict the joining of two different companies; however, as per corporate restructuring consulting experts, there are few differences in their use cases.
The term merger is used to define the combination of two different business entities to create a new joint organization. On the other side, acquisition defines the takeover of one company over another. In general, acquisitions and mergers are completed to expand the reach and to gain enhanced market share which further improves shareholder value. The distinction between both can be started with simple words such as friendly deal leads to merger and the hostile deal is defined as acquisition.
If you are running a business in Singapore and are interested to know some reliable corporate restructuring options, it is better to get more details about mergers and acquisitions. Well, below we have listed a few details about both these corporate restructuring Singapore options to help you make a confident decision.
Corporate Restructuring Consulting 101 – Merger
In legal terms, a merger requires two different entities to consolidate to form a new single entity. This new company is known to have a new management structure and ownership while including members from both firms. A merger doesn’t require cash to close the deal; rather, it involves the dilution of individual powers of both companies.
Generally, friendly mergers between companies do not occur very frequently. You will rarely see two companies availing some benefits by combining their forces or two CEOs rarely agree to give up their authority or power. This happens only when stocks of both entities are surrendered and the new stocks are released under the name of the merged entity.
In most cases, the merger is done to minimize operational costs and boost revenues by expanding into new markets. Corporate restructuring consulting experts state that mergers are voluntary decisions and they involve companies of the same scope and size.
Corporate Restructuring Consulting 101 – Acquisitions
The acquisition doesn’t cause the formation of a new entity. Rather, in most cases, the smaller company is consumed or it ceases its operations and all its assets become part of some big entity. Acquisition in simple terms is called a takeover and it carries a negative impression in comparison to the merger. Therefore, many acquiring companies call acquisition a merger, even if it is actually a takeover.
Acquisition occurs when one company takes ownership of all decisions related to the operational management of the other company. Acquisition in most cases requires a huge amount of cash and the power of the buyer matters a lot. Companies may need to acquire other business entities to improve the economy, purchase their vendors, or lower the cost per unit with increased production estimates. Companies may try to improve their market share or expand into a new niche area by acquiring assets of some other entity. Many business owners also take over other companies to obtain their technologies which can help them save more on research and development in the long run.
If you are planning to choose any of these options for corporate restructuring Singapore, it is better to take help from experienced professionals in the country.