One of our many areas of expertise at the ABCO Group is helping business owners create effective exit strategies from their successful companies, ensuring a smooth transition for staff, and meeting all state and federal regulations. One popular exit strategy is the process of mergers and acquisitions. This process differs according to need and situation, so we explore mergers and acquisitions: what are they, and what differentiates the methods from each other? We also look at which strategy works best for which case.
What are Mergers and Acquisitions?
The collective term “mergers and acquisitions” essentially refers to the process companies undergo when they combine in some way through financial transactions. Legally, however, these terms mean different things. Mergers occur between companies of fairly similar sizes, consolidating to form a new company. An acquisition is when a larger company takes over a smaller company, so the acquiring company becomes the new owner, absorbing the smaller company into the business.
What Different Forms of Mergers and Acquisitions Exist?
The ABCO Group is a holding company specializing in acquiring or partnering with existing businesses. Mergers and acquisitions can take many forms. Two such types of acquisitions are Statutory integration and Subsidiary integration. The former takes place when the acquiring company is larger than its target, resulting in the complete absorption of the smaller business and all its assets and liabilities. Subsidiary integration occurs when the target becomes a subsidiary of the parent company while still operating its business.
Consolidation is a third integration not used by the ABCO group, which occurs when both the acquiring and the target companies merge to form an entirely new company.
Businesses can be acquired in various ways. The acquiring company can purchase the stocks of the target, buy the target’s assets, or employ a combination of both, which is called a mixed offering.
Why Do Mergers and Acquisitions Take Place?
Again, there are several reasons why mergers and acquisitions take place. It can be an exit strategy for a successful business owner, allowing a smooth transition away from their business, whether for retirement or other purposes. Alternatively, acquisitions offer excellent market diversification opportunities for businesses looking to expand their portfolios; they increase their growth opportunities with new businesses and team members under the parent company’s banner.
How Can the ABCO Group Help You?
We pride ourselves on partnering with companies that share our values of growth and integrity. We provide support to all businesses we work with and strategize alongside business owners to find the right solution for them. If you’d like to learn more, contact us today, we’d be happy to help.