(1) Purchase and merger
Purchase merger refers to the acquisition of the assets of the target enterprise by the acquirer. This form is generally based on cash acquisition, which will buy out the overall property rights of the target enterprise. This kind of acquisition only calculates the overall asset value of the target enterprise and determines the purchase price according to its value. The merging party does not negotiate with the merged party how to deal with the debt. When the enterprise completes the merger, it pays off its debts.
Purchase and merger will make the target enterprise lose the qualification of economic subject. The purchase price of the acquired enterprise is actually the bid of the acquired enterprise after paying off its debts. Therefore, even if the acquired enterprise bears the debt of the target enterprise, the assets of the target enterprise are still greater than the debt, which makes the acquired enterprise gain practical benefits.
(2) Debt consolidation.
Debt M&A means that when the assets of the target enterprise are equivalent to the debts, the acquirer accepts the assets of the target enterprise on the condition of assuming the debts of the target enterprise. As a merged enterprise, all assets are integrated into the merged enterprise, and the legal entity disappears and loses the qualification of economic entity. According to the principle of reciprocity of rights and obligations, the merged enterprise has no reason to acquire the property of the merged enterprise and refuse to bear its debts.
The characteristic of this kind of merger is that the merged enterprise will absorb the debts and overall property rights of the merged enterprise, so as to undertake the debts of the merged enterprise and realize the merger. The transaction of merger behavior is not based on price, but on the ratio of debt to overall property value. Usually, the target enterprise still has potential or available resources.
(3) Absorbing the merger of shares
Absorb the net assets of the merged enterprise as share capital, invest in the merged party and become the shareholders of the merged enterprise.
Incorporating shares into a merged enterprise will merge all the assets of the merged enterprise into the merged enterprise, and the merged enterprise will no longer exist as an economic entity. Share absorption also occurs when the assets of the merged enterprise are greater than the debts. The owner of the merged enterprise and the merged enterprise have the right to share dividends and bear the obligation to bear losses. In countries with relatively perfect market economy, there are many forms of this merger. These include asset sharing, stock exchange and so on.
Holding merger
Holding merger means that an enterprise realizes holding and merger by buying shares of other enterprises. As an economic entity, the merged enterprise still exists and has legal personality, but it has been transformed into a joint-stock enterprise. As a new shareholder of the merged enterprise, the merged enterprise should not bear joint and several liability for the original debts of the merged enterprise, and its risk liability is limited to the share capital contributed by the holding company. Therefore, the debts of the merged enterprise are paid off by itself within the limit of all the property it manages, and bankruptcy will be treated as such in the future, which has nothing to do with the merged enterprise.
This kind of merger no longer takes cash or debt as the necessary transaction condition, but takes the company's share as the basis and the holding condition as the basis to realize the possession of the property rights of the merged enterprise. This kind of holding merger is generally a merger in the course of enterprise operation, rather than a transfer through the suspension of production. This is a peaceful form of merger.
In the market economy, enterprise merger is one of the ways of enterprise change and termination, a normal phenomenon of survival of the fittest in enterprise competition, and a product of highly developed commodity economy. Judging from the main forms of enterprise merger (the first three forms), "enterprise merger" belongs to one kind of enterprise merger. Enterprise merger can be divided into two forms: absorption merger and new merger. Absorption and merger refers to the merger of two or more companies, in which one company absorbs (merges) other companies and becomes a surviving company. In this merger, the surviving company still maintains the original company name, has the right to obtain the assets and debts of the absorbed company of other companies, and at the same time bears its debts, and the absorbed company no longer exists. The fourth form of business combination is different from business combination, which is based on the premise of not changing the legal person status of the merged enterprise and aiming at purchasing the equity of the merged enterprise. Because it controls part of the equity of the acquired enterprise, it has obtained the management decision-making power of the acquired enterprise. The merged enterprise and the original shareholders of the merged enterprise jointly bear the profits and losses of the merged enterprise.
Second, what are the risks of M&A?
Risks in enterprise merger and acquisition;
(a) reporting risks
In the M&A process, both parties must first determine the M&A price of the target enterprise, which is mainly based on the annual report and financial statements of the target enterprise. However, in order to obtain more benefits, the target enterprise may deliberately conceal the loss information, exaggerate the income information, and fail to fully and accurately disclose many information that affects the price, which will directly affect the rationality of the M&A price, thus making the merged enterprise face potential risks.
(2) Assessing risks
For M&A, because it involves the transfer of all or part of the assets or liabilities of the target enterprise, it is necessary to evaluate the assets and liabilities of the target enterprise and the target. However, there are some problems in the evaluation practice, such as the accuracy of the evaluation results and the interference of external factors.
(3) Contract risk
The target company may be lax in the management of related contracts, or due to the subjective reasons of the seller, the buyer can't fully understand the details of the contract concluded between the target company and others, which will directly affect the risks of the buyer in the merger and acquisition.
Asset risk
The target of enterprise merger and acquisition is assets, and the ownership of assets becomes the core of the transaction. In the process of M&A, if we rely too much on the book information of the statements without further analysis on the quantity of assets, whether the assets exist in law and whether the assets are effective in the process of production and operation, it may lead to a large number of non-performing assets in enterprises after M&A, thus affecting the effective operation of enterprises.
(v) Debt risk
For M&A, after the completion of M&A, the enterprises after M&A should bear the original debts of the target enterprises. Because there are liabilities and future liabilities, there is a lot of room for subjective operation, and some future liabilities are not reflected in the company's accounts. Therefore, these debt problems are the risks that must be paid attention to in mergers and acquisitions.
(vi) Financial risks
Corporate mergers and acquisitions are often carried out through leveraged buyouts, which will inevitably lead to a high debt ratio of the acquirer. Once the actual effect of enterprise merger and acquisition fails to achieve the expected effect due to market changes, the enterprise itself will fall into financial crisis.
(VII) Litigation risks
In many cases, the outcome of litigation is difficult to predict in advance. If the seller fails to fully disclose the ongoing or potential litigation and the personal situation of the litigants, the litigation result is likely to change the asset amount of the target company such as accounts receivable.
Further reading: How to buy insurance, which is good, and teach you how to avoid these "pits" of insurance.