Describe the two dimensions that help explain the distinction between mergers and acquisitions. Then give a real-life example of one merger and one acquisition.
What will be an ideal response?
Student examples will vary. A sample answer follows:
A merger describes the joining of two independent companies to form a combined entity. One dimension on which mergers and acquisitions differ is friendliness. Mergers tend to be friendly; in mergers, the target firm would like to be acquired. Acquisitions can be friendly or unfriendly. If the target firm doesn't want to be acquired, the acquisition is considered a hostile takeover. Size is the other dimension on which mergers and acquisitions differ. The combining of two companies of comparable size is often described as a merger. By contrast, when large firms buy up startup companies, the transaction is considered an acquisition.
One example of a merger is the combination of Live Nation and Ticketmaster. One example of an acquisition is Daimler's acquisition of Chrysler (which Daimler later sold).
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