How are Merger & Acquisition?

3 min. readlast update: 11.07.2023

 Merger and acquisition is a very important type of securities delisting.

 - Merger is the merging of two or more companies and forming a new company. This may use the name of a specific company or create a new name. As a result, that company will be delisted and its shares will be canceled and become newly listed securities.

Example : AB Company and CD Company decided to merge the businesses together and established ABCD as a new company 

- Acquisition is when one company acquires another company, also called a target company. An acquisition is not like a merger because an acquisition does not create a new company. This acquisition can be done by purchasing a large number of shares in the target company until you become the ultimate shareholder or by purchasing the assets of the target company. In purchasing assets, the acquiring company can decide to take any action without having to obtain approval from other persons or other shareholders of the target company. 

Example : WX Company acquires YZ Company, making YZ Company's assets It is part of the WX company. This has affected the management of internal affairs with changes in the executive level.

How are Merger and Acquisition related to delisting?

When a merger occurs.

When companies merge together. Those companies will cease operations and their shares on the stock exchange will disappear. This causes those companies to be delisted from the stock exchange. 

However, when those companies merged together to form a new company. and register securities. This new company was able to return to the stock exchange. But the name of the stock will be changed to a new name as well.

When an acquisition occurs.

An acquisition is a process in which a company acquires a target company, either by purchasing shares or assets of the target company. As a result, the stock prices of the target companies and the decision-making power of individuals change.

Whether the acquired target company will have its shares delisted from the stock exchange or not depends on the acquiring company.

How does a public company become a private company?

When a private company acquires a public company, the public company becomes a private company. These public companies sell their common shares to private companies at higher prices to compensate for the loss of ownership in the company.

Companies that transition from public to private will have their shares delisted from the stock exchange. In some cases, stocks may be traded but not disclosed to the public. Moreover, companies that are privately held are no longer answerable to public shareholders or closely controlled by the government.

For instance:  

  • The merger between Heinz and Kraft (on March 25, 2015) formed a new company called Kraft Heinz Company (KHC), whose objective is to: Reduce the organization to a smaller size to reduce internal expenses.

  • A subsidiary of Apollo Company (APO) has proceeded with the acquisition of Tenneco Company (TEN) by purchasing common shares of TEN (on May 17, 2022) . As a result, these common shares cannot be traded on the stock exchange any longer and the Company's existing shareholders Tenneco will receive $20/share back.

  • In October, 2022, Elon Musk completed the acquisition of Twitter. As a result, Twitter's (TWTR) common shares were delisted from the stock exchange.

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