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Merger: A merger is fundamentally the combination of two or more business entities in which only one entity remains. The firms are typically similar in size. (Company A + Company B = Company A). Consolidation: A consolidation is a combination of more than one business entity; however, an entirely new entity is created.
In merger, one cooperative is absorbed by another, which retains its corporate identity. In a consolidation, a new cooperative is formed and both of the existing cooperatives disappear.
A merger is the union of two or more corporations, with one of the corporations retaining its corporate existence and absorbing the others. The other corporations cease to exist by operation of law. A consolidation occurs when a new corporation is created to take the place of two or more corporations.
A Type A reorganization must fulfill the continuity of interests requirement. That is, the shareholders in the acquired company must receive enough stock in the acquiring firm that they have a continuing financial interest in the buyer.
There are five commonly-referred to types of business combinations known as mergers: conglomerate merger, horizontal merger, market extension merger, vertical merger and product extension merger.
Summary. A type A Reorganization is a tax-free merger or consolidation. Generally, in a merger, one corporation (the acquiring corporation) acquires the assets and assumes the liabilities of another corporation (the target corporation) in exchange for its stock.