IGCSE, A Level Business Student Forum

Q16 Differentiate between mergers & takeover growth strategies of a business. [6]

Possible Structure:
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[AN+]

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[KN] Ownership and Control.
[AN]In a merger, two companies of roughly equal size come together to form a new entity. Both companies' shareholders usually become owners of the new entity.
In a takeover, one company (the acquiring company) acquires another company (the target company).
[AN+]In a merger the control is shared and in a takeover one company gains the ownership of whole company

[KN] Financing
[AN] In a merger, both companies' shareholders may invest capital or assets into the new entity.
In a takeover, the acquiring company needs to secure funding to purchase the target company's shares or assets. It may involve taking on debt, using cash reserves, or issuing new shares.
[AN+] Financing is often more balanced in mergers whereas the company that took over gains full control and have to manage finances by any mean.

[KN] Operations of Firm
[AN] A merger is a business combination in which two or more companies agree to combine their operations and resources to create a new entity. It is often referred to as a "merger of equals." while A takeover, also known as an acquisition, occurs when one company (the acquiring company or acquirer) buys a significant portion or all of the assets or ownership stakes of another company.
[AN+] thus merger is overall shared and take over is when a comapany takes over a firm in same industry.

[KN] Partnership
[AN] In a merger, the participating companies typically consider themselves as equals, with both sides agreeing to the merger terms. The goal is to create a new entity that is stronger and more competitive through the synergy of both businesses. while a take over In a takeover, the acquiring company assumes majority or full ownership and control of the target company. The target may retain some level of independence or integrate fully, depending on the acquirer's strategy.
[AN+] it is important for both companies to decide the partnerships they want to do

KN: Mutual Agreement
AN: Mergers typically involve two companies agreeing to combine their operations to form a new entity
AN+: It's a collaborative process where both companies willingly come together
KN: Integration or Dissolution
AN: In many takeovers, the target company's identity, brand, and operations may be assimilated or dissolved into the acquiring company
AN+: leading to a more hierarchical structure

[KN]Agreement
[AN]Mergers involve two firms mutually agreeing to join forces and run a business together whereas takeovers may with or without the consent of the other business
[AN+]Thus a takeover can sometimes be more hostile than a merger

[KN]Different purpose for both
[AN]Mergers are often joined for mutual benefit whereas takeovers are made with the intent of gaining full control of the companys profit etc
[AN+]Thus a merger benefits both businesses whereas takeover benefits one

[kn] A merger is a combination of two previously separate businesses into a new business while a takeover occurs when one company acquires a controlling interest in another company
[an] a mergers main aim is to make the business more efficient and profitable while takeover is done to take full control over the other persons business.
[kn]mergers involve two firms who decide to work together inorder to gain profits while takeover is done to put the other business out of the competition
[an] therefore takeovers are more hostile then mergers

[KN] Shared control
[AN] In a merger, both companies often maintain some level of control and ownership in the newly formed entity.
[AN+] It's a more collaborative approach.

[KN] Control Transfer
[AN] In takeovers, the acquiring company seeks to gain control and ownership of the target company.
[AN+] The target may lose its independence and become a subsidiary of the acquirer.

[KN] merger combines 2 already existing businesses and takeover is taking over an already existing business
[AN] a takeover is sometimes done to reduce competition in the market whereas mergers sometimes combine to help each other compete in the market
[AN+] both ways benefit from the situation at hand

[KN]mergers are to help each other and takeover is done to destroy the other (sometimes)
[AN] this means that a merger would split its profits whereas a takever means the single owner keeps it all
[AN+]

(KN) level of control (AN) in a merger both firms divide the control either equally or per an agreement whereas in a takeover all control is transferred to one firm (AN+) this can help to make plans whether to start their own initiative or to take help through a merger
(KN) most mergers are done to establish good relations but takeover is done to eliminate competition (an) mergers help both the firms to achieve a stable ground but takeover is done to take complete control of the other particularly to stop competition(AN+)a merger therefore means a split in profits and risk but a takeover means the profit and risk is transferred to one firm

(kn)two companies combining vs lager business buying small one
(an)merging can give you more assets where as taking over can give you access to new market
(an+)more assets as in machinery can increase output with better quality and access to new market can give business greater brand recognition
(kn)mergers can decrease your liability whereas taking over can increase it
(an)bank loans that had to be payed now can be paid by the other firms finances however taking over would mean that their unpaid loans have to paid paid by you
(an+)when liability is decreased business can focus on existing operation on the other hands when a business is drowning in liabilities it won't be able to focus on external or internal growth

[KN] Ownership
[AN] when a frim is joining with another firms it would be merger whereas when an business buys out another business it's an take over
[AN+] so in merger the both frim shareholder becomes the owners where as the buyer in the take over in the sole owner

[KN] purpose
[AN] frim start producing together specially to make more profit together whereas an frim is bought have it's full control
[AN+] so the merger is done to benefit both firms as takeover only benefits only one

[KN] Difference in ownership.
[AN] In a merger two or more businesses agree to combine their operations to form a new single entity however in takeover the target company losses its independence and the other gets all the control.
[AN+] Thus a takeover is more hostile than merger.

[KN] Different purposes.
[AN] Mergers are often joined to get access to mutual benefit however takeovers are done to get solely control of everything of the targeted company.
[AN+] Thus this means merger benefits both the merging companies but takeover benefits only one.

(KN) Merger can be done to help eachother in the market whereas takeover can be done to reduce competition.
(AN) as when a business attempts takeover over another business it's hoping to reduce it's competition whereas mergers sometimes combine to help each other in the market by perhaps creating a new product together,
[AN+] this way a business that takes over a market can grow exponentially in size whereas a business that merges with another can hope to satisfy the needs of the economy.

(KN) Level of control established
(AN) as a business that merges with another has equal amount of or one side level of control within a business whereas in a takeover or control is transferred to one side who succeeds in the takeover,
(AN+) hence, a merger may have 2 sides control systems compared to the takeover of another business which has only one side of control.

[KN] Ownership
[AN]In a merger all shareholders of both businesses will become owners of the merged business however in a takeover ownership is completely transferred to the business which takes over the other
[AN] As a result decision making may become difficult with so many shareholders which may delay output and overcome benefits of the merger .On the other hand in a take over growth becomes more smoother

[KN]In a merger both businesses in a combined business will have limited liability whereas in a takeover all liabilities will fall on the new owner
[AN] therefore in a merger both businesses keep paying their debts according to their business plans whereas takeover business might find it difficult to manage this financial burden initially
[AN] As a result a takeover may have liquidity issues