With the escalating furtherance in the finances and the operations of a business firm the corporate restructuring appears as an undertaking to mark its pre- eminence in establishing the strategies for the future investment layout of the corporations in the best possible and effective manner both in terms of finances as well as operations. Of all the financial transaction which takes place in a business enterprise, namely joint venture, merger and acquisitions play a very critical role amongst them. More often these transactions are being made with the perspective of expanding the working profile domain of the business entity in the market so as to ascertain both monetary and market value. These instances of negotiations entail along with them various aspects of business corporates which emerges as the deciding characteristic of business fate in the near future and hence become important because if these strategies are not structured efficiently they could even lead for a disastrous downfall of the entire business set up. Main reason of these business actions is to eliminate the competition in the market and to potentiate the being into the existing market. At times if these restructuring decisions are not strategically followed and implemented also leads to a complete failure of the subsequent business layout even ending up for the abandonment of the complete business plan . While when introspected closely this commercial association among the various firms are found to have a mild demarcation of differentiation amid them.
What Is A Merger?
A merger is referred to as a voluntary unification of the two firms on legal as well as corporate grounds to become as a unified business entity. It is a consolidation made by the two firms on grounds of similar business profile or even of unrelated business (which aim to be symbiotic in their nature) coming together to work as mutual entitles entitled as one post to a merger. The process of merger generally leads to the formation of the new legal entity which works towards to strive for the success of the company. More often a term “merger of equals” is also used to generalize the significance of this phenomenon which apprises about the fact that in a merger, the companies coming together are broadly of equal prominence in terms of market forces and pecuniary terms. A merger is generally carried so as to enhance the market value of the business in the corporate sector. A merger in which the identification of long term goals are pre-established and intervened well leads to a complementary partnership, business acquiring products, broaden distribution channels, enhanced technical knowledge, strengthen infrastructure and raise cash to propel the business establishment to a new level of success.
What is Acquisition?
Acquisition on the other hand is the phenomenon in which the firm of high competence purchases the potentially targeted firm and owns its market share as well which consequently leads to the abolishment of the acquired firm while the one which has acquired remains intact and stronger even after. The episode of an acquisition to take place is quite competitive in nature as it usually takes much more time in its occurrence because of the possible series of negotiation associated in this process. In this context another important aspects which comes upfront is the leveraged buyout. This concept is associated with the fact that certain companies borrow a substantial amount of money using collaterals in order to make the acquisition successful without dedicating a large amount of capital. In many of the instances it is also being seen that the leveraged buyout strategy is adopted in order to take a public company private by acquiring it. In these collaborative incidences the major breakthrough remains is to analyses the operational and the financial benefits which can be looked upon as soon as these firms coordinate with each other in the business framework strategy.
These mergers and acquisition are indeed carried out so as to uncertain the benefits in terms of both market value and shareholders value of the adjoining firms .The complete prognosis study of both the participating companies extending outward towards each other to work govern the future implication of the association to a large extent.
How Joint Venture Is Different from Merger & Acquisition?
With this discussion, then comes into picture a distinctive concept of the corporate sector named as the joint venture which is as the alliance of the two companies or firms coming together so as to achieve a predefined goal or objective. In this manifestation the firms though work as independent and self-sustain bodies but come together in order to accomplish a particular target. This cannot be entitled to be as partnership because in case of partnership it’s only the two major business player coming together while in case of a joint venture more than two companies can come together then forming a legal entity so to achieve the predefined goal set. The firms falling under this joint venture gets associated together in all mutual decisions and meetings to characterize the major discussion pertaining to the preset goal of the venture. The tenure for which this joint venture is sustained can either be long term or short term depending upon the scope of the business activity. The most important aspect of a joint venture which comes into being is the fact that the proprietorship of the companies engaged in the joint venture remains entitled to them as per the extent of interest being shared by them in the subjective pursuits.
Coming to the conclusion of these corporate aspects, it can be inferred that mergers are the amalgamation of two previously existing firms into a new firm of raised quotient in the business activity creating more value to the new imbibed firm. While an acquisition corresponds to the phenomenon in which a company acquires another company dissolving the existence of the acquired firm. On the other hand joint venture in the one in which two or more than two companies come together to potentially achieve the already existing deemed targets.