MergerThe process by which two companies become one. If the companies are listed, the merger may be by agreement, or hostile. A hostile bid is one in which the directors of the target company reject the approach, but it is still possible for the predator company to obtain control if enough of the target's shareholders accept its offer.
Vertical mergerVertical merger
When one firm acquires another firm that is in the same industry but at another stage in the production cycle. For example, the firm being acquired serves as a supplier to the firm doing the acquiring.
Panel on Takeovers and MergersPanel on Takeovers and Mergers
The City watchdog whose job is to oversee the conduct of takeovers involving companies listed on the London Stock Exchange.The Panel writes and enforces the City Code on Takeovers and Mergers, which sets out in meticulous detail the management and timing of takeover bids. The objective of the City Code is to ensure that high standards of integrity and fairness are maintained, and that shareholders in both bidding and target company are treated equitably.The Panel is not concerned with the financial or commercial advantages or disadvantages of a takeover, nor is it concerned with competition issues.The City Code does not have the force of law, but, as the Code says 'those who seek to take advantage of the facilities of the securities markets in the United Kingdom should conduct themselves in matters relating to takeovers in accordance with best business standards and so in accordance with the Code'. It goes on to say that 'Those who do not so conduct themselves may find that, by way of sanction, the facilities of those markets are withheld.'Panel on Takeovers and MergersPO Box 226The Stock Exchange BuildingLondonEC2P 2JXTel: 020 7382 9026http://www.thetakeoverpanel.org.uk
Merger ArbitrageMerger Arbitrage
In the context of hedge funds, a style of management that involves the simultaneous purchase of stock in a company being acquired and the sale of stock in its acquirer.
A corporate restructuring in which one part of a company is spun off as a new company, often with quoted status of its own. Examples in the UK include Zeneca which was spun out of ICI, and Argos which was spun out of British American Tobacco.Like their opposite - mergers - demergers tend to go in and out of fashion. When share prices are rising, companies like to use their 'paper' (i.e. shares) to acquire other companies, so their advisers encourage merger activity. In a market of falling prices, mergers and IPOs are less popular, and the merchant banks who earn their fees from corporate activity will start to look at demerger possibilities for their clients.From a tax point of view, when Company A splits into two or more parts, and distributes shares in each part to its original shareholders, there is no disposal for CGT purposes.In a study of 38 demergers, the London School of Economics found that demergers are beneficial to shareholders both at the time of the announcement and in the two years following.
Conglomerate mergerConglomerate merger
A merger involving two or more firms that are in unrelated businesses.
Further SuggestionsMerger Of Title
City code on takeovers and mergers