Merger definition

When two or more companies decide to combine and become one entity, it is called a merger.

Mergers usually take the form of a stock swap between shareholders. Multiple listings on stock exchanges will have to form one listing, so shareholders in one firm are given securities in the other to compensate for the loss of their stock.

Although they are often referred to under the same heading of mergers and acquisitions (or M&A), mergers differ significantly from acquisitions. They are usually mutually agreed upon by – and end in a new company formed of – all the firms involved.

Mergers can arise for various different reasons

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