Financial Markets Book Financial Markets For The Rest Of Us
An Easy Guide To Money, Bonds, Futures, Stocks, Options, And Mutual Funds
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by Robert Hashemian

Page 203

parts of their business to be established as a new independent company. Or the merger may combine an entire company with part of another company. Again the board and the shareholders must be in agreement with the merger before it is carried out. At the conclusion of the merger both companies cease to exist and a new company is born, trading either with a new stock symbol or the symbol of one of the merging companies.

Mergers and acquisitions are complex transactions. Once they pass the approval of their respective shareholders, they may have to pass domestic and international regulatory laws as well. Many of these laws are in effect to assure fair competition and ethical business practices. For example, if an acquisition is viewed by the Federal Trade Commission (FTC) as resulting in a monopoly, it may be blocked or restricted with some conditions and rules before it is approved.

As well known examples of M&As we can note the acquisition of Digital Equipment Corporation (DEC) by Compaq Computer followed by Hewlett Packard aquiring Compaq a few years later, the merger of MCI with Worldcom, the merger of Citibank with Travelers Group, the merger of German car maker Daimler Benz with Chrysler, and the merger of AOL with Time Warner.

As an aside, you may have heard of the expression Merger Monday. This refers to the flurry of M&A activities that are usually announced prior to the opening of the stock market on Mondays, causing a higher than usual level of trading activity. The reason behind the Monday morning (or Sunday night) M&A announcement is that many times businesses take advantage of the weekend to hammer out the final details of the upcoming M&A, and by Monday morning they are ready to make the announcement.


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