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Small Business Merger Guidelines Compare and analyze the corporate structures. Determine the leadership of the new company. Compare the company cultures. Determine the branding of the new company. Analyze all financial positions. Determine operating costs. Do your due diligence. Conduct a valuation of all companies.
A merger takes place when two companies combine to form a new company. Companies merge to reduce competition, increase market share, introduce new products or services, improve operations, and, ultimately, drive more revenue.
How do stocks work with mergers? Depending on the specifics of the merger, investors may have their shares cashed-out, or exchanged for shares of the new company. Prices of stocks may increase or decrease, often depending on if they're shares of the target or acquiring company.
Mergers combine two separate businesses into a single new legal entity. True mergers are uncommon because it's rare for two equal companies to mutually benefit from combining resources and staff, including their CEOs. Unlike mergers, acquisitions do not result in the formation of a new company.
After the acquisition, the subsidiary is absorbed into the acquired company, and the buyer (the parent company) becomes the only shareholder. The acquired company becomes a wholly-owned subsidiary of the acquiring entity, and the buyer acquires all the assets and liabilities of the acquired company.