There may be different types of mergers and acquisitions.
The acquiring company may take over the selling company by buying out its voting stock.
The types of acquisitions can be varied. The purchasing company may do such absorption either amicably by agreement with the management of the target company or through tender offer to buy out its voting stocks.
In a tender offer bypassing the management of the target company, the purchasing company makes offers to buy out the voting stocks directly from the shareholders of such company. Unlike a merger, take over through tender offer does not require stockholder voting or clearance. However, dissenting shareholders of the absorbed company may hold on to their stocks without selling them to the absorbing company.
In a proxy contest, a group of dissenting shareholders through solicitation of proxy forms and proxy voting dislodge the existing board of directors and elect their nominees on the board in place of those removed from directorship, in order to take over the management and control of the company.
A bidding corporation may also buy out another company by purchasing all its assets. However, this is an expensive proposition involving costly transfer of legal title as well as approval of the shareholders’ of the selling company.
From another perspective acquisition can be horizontal, vertical or conglomerate.
A horizontal acquisition may take place by and between companies in the same line of business.
A vertical acquisition involves combining of complementary resources, where a company either expands upstream backward taking over the source of raw materials or surges downstream forward acquiring the distribution outlets.
A conglomerate is created through combination of unrelated businesses in the form of a multiple product company with each such product division organized as a semi autonomous profit centre.
Demerger is also a form of corporate restructuring which involves the spin off or sale of one division of a company. This is an acquisition for the buyer. These are two sides of the same coin.
