Corporate Mergers and Acquisitions

merger

merger, in corporate business, fusion of two or more corporations by the transfer of all property to a single corporation. The remaining corporation continues in existence, having absorbed the other(s). Mergers may be of various types: A vertical merger integrates different types of businesses that may share a supplier-customer relationship; a horizontal merger brings together related businesses; an extensional merger. joins two similar businesses to enter a new market; and a hostile takeover occurs when a stronger business absorbs another against its will. The methods of effecting mergers vary. Often the corporation that continues to function makes an outright purchase of the property and stock of the others; exchange of bonds, options, and other agreements are also employed by the corporations involved.

Mergers may be effected to increase profits and reduce losses through the reduction of competition, to diversify production, to protect against the liabilities of concentration in a single area, or to revive or rejuvenate failing businesses by the infusion of new management and personnel. Mergers for monopolistic purposes were among the unfair practices that the Sherman Antitrust Act (1890) and, more especially, the Clayton Antitrust Act (1914) attempted to correct. The international nature of many modern corporations now also subjects mergers to antitrust scrutiny overseas, particularly in the European Union.

The end of the 20th cent. witnessed a great increase in mergers; in the United States alone, 60,375 mergers involving a total of over $4.5 trillion occurred between 1980 and 1996. Among the largest recent U.S. mergers are those between America Online and Time Warner (2000; $165 billion, but worth significantly less after the bubble in Internet-related stocks collapsed), Exxon and Mobil (1999; $81 billion); Citicorp and Travelers Corp. (1998; $72.6 billion), AT&T and Bell South (2006; $67 billion), SBC Communications and Ameritech (1998; $60.1 billion), and AT&T and TCI (1999; $48 billion).

See also conglomerate.

The Columbia Encyclopedia, 6th ed. Copyright© 2015, The Columbia University Press.

Corporate Mergers and Acquisitions: Selected full-text books and articles

Mergers & Acquisitions from A to Z By Andrew J. Sherman American Management Association, 2011 (3rd edition)
Mergers, Acquisitions, and Corporate Restructurings By Patrick A. Gaughan Wiley, 2011 (5th edition)
The Morning After: Making Corporate Mergers Work after the Deal Is Sealed By Stephen J. Wall; Shannon Rye Wall Perseus Publishing, 2000
Mergers and Acquisitions: A Guide to Creating Value for Stakeholders By Michael A. Hitt; Jeffrey S. Harrison; R. Duane Ireland Oxford University Press, 2001
A Buy-Side Model of M & A Lockups: Theory and Evidence By Coates, John C., IV; Subramanian, Guhan Stanford Law Review, Vol. 53, No. 2, November 2000
Differences between Mergers and Acquisitions: A CPA Valuator Can Help Clients Decide Whether to Merge or Acquire By Mastracchio, Nicholas J., Jr.; Zunitch, Victoria M Journal of Accountancy, Vol. 194, No. 5, November 2002
Intervening in the Middle: Coping Strategies in Mergers and Acquisitions By Buono, Anthony F Human Resource Planning, Vol. 15, No. 2, June 1992
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