Mergers & Acquisitions
3. Merger & Acquisition Defined
Authors: Staff Legal Eagle
Firm / Chambers:
Last updated: 22 Aug 2015
- The terms 'merger' and 'acquisition' are commercial terms rather than specifically legal terms. The phrase mergers and acquisitions refers generally to the different processes surrounding corporate takeovers. A takeover occurs when control of a company is transferred from one person or company to another.
- A person or company is usually assumed to have control over a company if they own more than half of a corporate entity's voting shares. In some situations control is obtained with less than this.
- There is a common assumption that a 'merger' occurs when a smaller company becomes part of a larger company and subsequently ceases to exist independently. In practice the target company (company being taken over) usually becomes a subsidiary of the larger company. It maintains an independent existence but is controlled and owned by the larger company.
- As such a merger, acquisition or takeover all fall under the description of 'control transactions.' All of these transactions are characterised by an acquisition of interests in voting securities that affect overall control.
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