MEDINA, Keen Onin M.

March 27, 2017

BSCE 5 11:30 12:30
MWF

I. DEFINITION

A. Merger
A merger is a corporate strategy of combining different companies into a single
company in order to enhance the financial and operational strengths of both
organizations.
A merger usually involves combining two companies into a single larger
company. The combination of the two companies involves a transfer of ownership,
either through a stock swap or a cash payment between the two companies. In
practice, both companies surrender their stock and issue new stock as a new
company.

Source: http://www.investinganswers.com/financial-dictionary/businesses-
corporations/merger-1821

B. Acquisition
An acquisition is the purchase of all or a portion of a corporate asset or target
company.
An acquisition is commonly mistaken with a merger which occurs when the
purchaser and the target both cease to exist and instead form a new, combined
company.
When a target company is acquired by another company, the target company
ceases to exist in a legal sense and becomes part of the purchasing company.
Acquisitions are commonly made by using cash or debt to purchase
outstanding stock, but companies can also use their own stock by exchanging it for
the target firm's stock. Acquisitions can be either hostile or friendly.

Source: http://www.investinganswers.com/financial-dictionary/stock-
valuation/acquisition-2224

C. Divestiture
A divestiture or divestment is the reduction of an asset or business through sale,
liquidation, exchange, closure, or any other means for financial or ethical reasons. It
is the opposite of investment.

Source: http://www.investinganswers.com/financial-dictionary/investing/divestiture-
110
 D. Conglomerate
A conglomerate is a corporation made up of several smaller, independently-run
companies which may operate across several sectors and industries.
Conglomerates are generally formed for two reasons: to diversify risk by
participating in unrelated businesses or to expand a business within an industry to
include suppliers and product purchasers.

Source: http://www.investinganswers.com/financial-dictionary/businesses-
corporations/conglomerate-119
E. Subsidiary
A subsidiary is a company with voting stock that is more than 50% controlled by
another company, usually referred to as the parent company or the holding
company. A subsidiary is partly or completely owned by the parent company, which
holds a controlling interest in the subsidiary company. In cases where a parent
company owns a foreign subsidiary, the subsidiary must follow the laws of the
country where it is incorporated and operates, and the parent company carries the
foreign subsidiary's financials on its consolidated financial statements.

Source: http://www.investopedia.com/terms/s/subsidiary.asp

F. Parent Company

A parent company has control of the management and operations of a subsidiary

company. It is also referred to as "holding company."
A parent company has enough voting stock to influence of the board of
directors and control the management and operations of the subsidiary company.
A parent company may be involved in the ownership and control of the
subsidiary company for a variety of reasons. For example, a parent company may
have spun off the subsidiary into a new separate company to reduce
the overhead and streamline the operating costs. Alternatively, a parent company
may buy shares as well as control of a company to enable it to integrate and
coordinate its activities with other subsidiary businesses under the control of the
parent company.

Source: http://www.investinganswers.com/financial-dictionary/businesses-
corporations/parent-company-611

II. EXAMPLES
A. Merger
1. Disney and Pixar (2006)
2. Exxon and Mobil(1999)
Source: http://www.rasmussen.edu/degrees/business/blog/best-and-worst-
corporate-mergers/
B. Acquisition
1. eBay acquired Skype for $2.6 Billion (2005)
 2. News Corp buys MySpace for $580 Million (2005)
Source: https://www.thestreet.com/story/11271958/2/7-awful-
acquisitions-of-giant-companies.html
C. Divestiture
1. Johnson & Johnson divests Ortho Clinical Diagnostics
2. Pfizer divested its animal health products business
Source: http://www.cheatsheet.com/stocks/jj-continues-strategic-
pruning-with-this-divestiture.html/?a=viewall
D. Conglomerate
1. Exxon Mobil
2. General Electric (GE)
Source: http://www.therichest.com/business/top-10-biggest-
conglomerates-in-the-world-based-by-revenue/
E. Subsidiary
1. Downy and Oral-B under Proctor and Gamble
2. Gatorade and Quaker Oat Products under PepsiCo
Source: https://www.qualitylogoproducts.com/blog/who-owns-what-
major-conglomerates-subsidiaries/
F. Parent Company
1. Boeing
2. Intel
Source: http://subsidytracker.goodjobsfirst.org/top-100-parents