Circular Merger

Sounds like the marriage of eight people standing around an altar.

It’s not. It’s just a special type of merger that brings together two companies that sell completely different products. Even though they make different things or offer different services, they likely operate parts of their company similarly in, say, marketing, research, or operations. Could be a coincidence, or maybe both CEOs went to the same business school.

Only two things matter. First, the combination makes them stronger economically. The deal might be between firms that are part of the same supply chain of an end product. Or it could be a deal between firms operating in the same sector looking to bolster market share. On this matter, it’s all about “synergy,” the worst word in the history of business.

Second, one of the other company ceases to exist and loses its identity. The other survives, takes over all of the assets, and assumes debts with the approval of both executive teams.

As you might imagine, a lot of these deals fall apart over the decision of which company gets to survive and what executives get to stay.

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Finance: What's the difference between m...23 Views

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Finance allah shmoop what's the difference between mergers and acquisitions

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all right people listen up Merger that's what's about to

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happen here it's a merger acquisition that's what's about to

00:16

happen here Corporate america is kind of same thing when

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two companies merge while they generally you know attracted to

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each other hopefully respect each other they share stock or

00:28

combined the stocks of each side and you know combine

00:32

efforts and then and then cuddle afterwards if they're successful

00:36

at the merger than the combination of two roughly equals

00:39

yields more than the one plus one combo that made

00:43

them so two companies get together on generally equal ish

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footing In that case acquisitions are a combining more like

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that eating thing on much different footing The large company

00:55

eats or buys the target either using its more highly

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valued stock currency or it's taft to do so Well

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why would a company acquire another Well the target might

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have one hundred employees ninety of whom can be fired

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with massive expense savings after the acquisition For the acquirer

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such that economically the acquisition won't just makes a whole

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lot of financial sense acquisitions happen for market power reasons

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As well like imagine the negotiating leverage that amazon would

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have if it bought the next five biggest online retailers

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Or maybe it'll just kill them Probably not legal for

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them to buy him anyway given the monopoly like dominance

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of amazon these days But wow that would be a

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powerful set of acquisitions And that would be a good

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reason for ems on to acquire a whole bunch Things

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and bezos would grow even more powerful maybe too powerful

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