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Mergers and Acquisitions – Common Misconceptions

Mergers and Acquisitions – Common Misconceptions

Mergers and acquisitions don’t always have a clear defining line. What does each of these mean and how do they differ? Fortunately, you don’t have to be corporate finance wiz to get the concept and define the differences of mergers and acquisitions.

Mergers are defined as the integration of two (or more) companies. The way this is done is by offering company A’s stockholders securities of company B.

Acquisitions are different. Unlike mergers, think of acquisitions more like a buy-out or take over. Company A will obtain most, if not all, of company B’s assets and takes complete ownership. By doing this, company A now has control over B. An acquisition is usually done when a company is looking to grow. It is easier for company A to take over company B with their working operations and niche already in place rather than to start from the bottom up.

According to Chief Executive there are six avoidable mistakes

Photo Credit – buddawiggi

companies make in mergers and acquisitions. First, loosing sight of the end goal. Next, not doing enough research, followed by not retaining the acquisition’s workforce, not blending culturally, overpaying, and forgetting the other company’s boss. Whether the misconception is that the other company will eventually assimilate or assuming that the deal will make all the money invested back, these are mistakes made in mergers and acquisitions that can be avoided with a little knowledge.

Bozeman Magazine, on the other hand, has the top two misconceptions of mergers and acquisitions.  One is cost, cost, and more cost! Granted, both companies involved in a merger or acquisition have made projections of how much it’s going to cost. But the reality of the situation is that the cost will far exceed those planned numbers. The second common misconception is that timelines and projected profits can be way off the mark, especially because these deals can get extensive and take a long time. Corporate finance executives really need to take these two misconceptions into account when drafting projections in relation to mergers and acquisitions.

Bozeman Magazine leaves us with the following advice, “Use the best professionals you can find. They are worth their weight in gold. Good accountants, good attorneys, and experts at buying, selling or merging businesses will save you time, money and insure a mutually profitable future for all.”

So there you have it! When it comes to mergers and acquisitions, use the best people you can find, including corporate finance experts, and don’t forget to plan for extra cost and time.  Keep this advice in mind and your mergers and acquisitions will be a sure success.

If you have questions about mergers and acquisitions, contact Stock Connections today! We’re experts in both and can help with the process from inception to completion.

One Response to “Mergers and Acquisitions – Common Misconceptions”

  • [...] Changes occur in corporate America every day and as an employee these changes can be intimidating, especially when they are related to the future of stock options during a merger or acquisition. In this multi-post blog series we will attempt to answer the age old question of, “What happens to my stock options?” In part one, we will introduce the first steps in understanding how stock options can be affected in a merger or acquisition. [...]

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