Merger & Takeover

Merger — two companies agree to combine into one (usually friendly). Think A + B → one new or one surviving company.
Takeover (Acquisition) — one company (the acquirer) buys control of another (the target). Can be friendly (agreed) or hostile (target resists).

Below is a clear, practical step-by-step breakdown for each.

how Merger & Takeover work

Strategy & fit
Companies identify why a merger makes sense (scale, cost savings, market access, technology, regulatory reasons).
Initial approach & discussions
Senior management or boards begin talks. If both sides are open, they sign a non-disclosure agreement (NDA) to share sensitive info.
Preliminary valuation & indicative offer
Each side (or a financial adviser) produces an indicative valuation to see if terms are realistic.
Due diligence
Deep review of finance, legal, tax, operations, IP, customers, liabilities, HR — to uncover risks and confirm value.
Deal structure & negotiation
Decide structure (stock swap, cash + stock, reverse merger, merger of equals), governance (who runs the combined company), and key terms (price, protections, representations & warranties).
Definitive agreement
Lawyers draft the merger agreement covering all terms, conditions, and remedies.
Approvals
Approvals needed may include boards, shareholders, and regulators/antitrust authorities (depends on jurisdiction and industry).
Financing
Arrange financing if cash is needed (loans, bonds, or equity issuance).
Closing
Transaction completes on the closing date — assets and ownership transfer per agreement.
Integration (post-merger integration, PMI)
Combine systems, cultures, teams, brands, and operations. This phase often determines whether the expected benefits are realized.

Merger of equals — two roughly equal companies combine and often create new management/brand.
Reverse takeover — a private company takes control of a public one to become public quickly.
Asset purchase vs share purchase — buyer can buy assets (avoids some liabilities) or shares (buys company with liabilities).
Friendly vs hostile takeover — depends on target board’s stance.
Tender offer — public bid to buy shareholders’ shares (common in hostile takeovers).

Strategy & fit
Companies identify why a merger makes sense (scale, cost savings, market access, technology, regulatory reasons).
Initial approach & discussions
Senior management or boards begin talks. If both sides are open, they sign a non-disclosure agreement (NDA) to share sensitive info.
Preliminary valuation & indicative offer
Each side (or a financial adviser) produces an indicative valuation to see if terms are realistic.
Due diligence
Deep review of finance, legal, tax, operations, IP, customers, liabilities, HR — to uncover risks and confirm value.
Deal structure & negotiation
Decide structure (stock swap, cash + stock, reverse merger, merger of equals), governance (who runs the combined company), and key terms (price, protections, representations & warranties).
Definitive agreement
Lawyers draft the merger agreement covering all terms, conditions, and remedies.
Approvals
Approvals needed may include boards, shareholders, and regulators/antitrust authorities (depends on jurisdiction and industry).
Financing
Arrange financing if cash is needed (loans, bonds, or equity issuance).
Closing
Transaction completes on the closing date — assets and ownership transfer per agreement.
Integration (post-merger integration, PMI)
Combine systems, cultures, teams, brands, and operations. This phase often determines whether the expected benefits are realized.

Target selection & strategy
Acquirer identifies a strategic or financial target and defines objectives (market share, technology, vertical integration).
Approach (friendly or hostile)
- Friendly: approach management/board, start talks.
- Hostile: acquirer may bypass management and make a public tender offer to shareholders or try to replace board members.
NDA & preliminary valuation
If target engages, NDA is signed and valuation/price range is discussed.
Due diligence
Same deep checks as mergers — finance, liabilities, contracts, litigation, tax, employees.
Offer & negotiation
Acquirer makes an offer (cash, stock, or mixed). Negotiations on price, break fees, transitional services, employee terms, etc.
Definitive purchase agreement
Legal contract specifying purchase price, conditions, closing mechanics, indemnities.
Regulatory & shareholder approvals
Antitrust, sector regulators, and—if required—target shareholder vote. In public takeovers, securities rules require disclosures.
Financing the acquisition
Secure funds (cash on hand, debt financing, share issuance).
Closing
Transfer of shares/assets; payment made; control changes hands.
Post-acquisition integration (or carve-out)
Integrate or run the acquired business as a subsidiary. If acquisition was hostile, cultural and retention work is critical.