Definition: Combining two separate businesses into a single new business. Frequently used in conjunction with the word "acquisitions", as in "mergers and acquisitions" or "M&A".
This should not be confused with an acquisition. In a true merger, a new corporation is formed that combines the assets of the two companies and grants the shareholders of each original company stock in the new company based on the relative valuations of the two original companies. In an acquisition, one company purchases the assets and majority ownership of the other company for a combination of cash, stock, and other consideration.
A merger may take one of several forms:
- statutory merger - a merger following the relevant statutes including procedures for notifying and obtaining the approval of the shareholders of both companies
- short-form merger - an accelerated statutory merger between a subsidiary and its parent company which controls a large majority of its shares
- de facto merger - a merger in which shareholders in the corporation to be absorbed are issued stock in the new company, and directors and employees continue in the new corporation
- cash merger - a merger in which shareholders in the company to be absorbed are offered cash for their shares instead of shares in the new company. This is basically an acquisition.
Pronunciation: mur-jur • (noun)
Also Known As: consolidation, amalgamation
Common Misspellings: merdger, murger
Examples: Mergers between two powerful brands can create some unusual (and lengthy) names: ExxonMobil, ChevronTexaco, AOLTimeWarner.