Legal analysis: Compared with acquisition, enterprise merger does not need to pay cash or pay less cash, mainly through stock exchange. The main merging party avoids huge financing pressure and cash outflow, and invests the resulting cash flow into the key development areas of the merged enterprise without affecting the capital turnover and operation of the merged enterprise. Shareholders of the target company can automatically become shareholders of the surviving company or the newly established company, which ensures the continuity and stability of enterprise operation and is conducive to the integration and operation of the merged enterprise. Due to the limited sovereignty, the employees of the merged company may face changes in salary and benefits, forced layoffs and so on. M&A between state-owned enterprises is too dependent on bank loans, and the financing channel is single, which will lead to the spread of M&A risks. The internal circulation of mergers and acquisitions of state-owned enterprises limits the market scope of transactions, which is not conducive to the discovery of enterprise value and the solution of enterprise problems.
Legal basis: Article 172 of the Company Law of People's Republic of China (PRC), the merger of companies can take the form of absorption merger or new merger. A company absorbs other companies for merger, and the absorbed company is dissolved. The merger of two or more companies to form a new company is a new merger, and the parties to the merger are dissolved.