THE BASICS OF
MERGERS & ACQUISITIONS
Mergers and acquisitions (M&A) and corporate restructuring are a big part of the practice at Gray Capital and the corporate finance world in general. Every day, Wall Street investment bankers arrange M&A transactions, which bring separate companies together to form larger ones. When they're not creating big companies from smaller ones, corporate finance deals do the reverse and break up companies through spinoffs, carve-outs or tracking stocks.
Not surprisingly, these actions often make the news. Deals can be worth hundreds of millions, or even billions, of dollars. They can dictate the fortunes of the companies involved for years to come. For a CEO, leading an M&A can represent the highlight of a whole career. And it is no wonder we hear about so many of these transactions; they happen all the time. Next time you flip open the newspaper's business section, odds are good that at least one headline will announce some kind of M&A transaction.
Sure, M&A deals grab headlines, but what does this all mean to investors? To business owners? To answer this question, these following sections (see below) will discus the forces that drive companies to buy or merge with others, or to split-off or sell parts of their own businesses.
Once you know the different ways in which these deals are executed, you'll have a better idea of whether you should cheer or weep when a company you own buys another company - or is bought by one. You will also be aware of the tax consequences for companies and for investors.
NEXT: 2. M&A: "Definitions"