Overview of a Statutory Merger In a statutory merger between two companies (where company A merges with company B), one of the two companies will continue to survive after the transaction has completed. This is a common form of combination in the mergers and acquisitions process. For example, Company B may lose its independent identity…
What are Investment Banking M&A Project Names? Until an investment banking M&A transaction is publicly announced, investment bankers should always use an M&A project name in place of the actual company name. It helps maintain the confidentiality of the transaction and prevents any material nonpublic information from being disclosed to members of the public before…
What is a White Knight? A white knight is a company or an individual that acquires a target company that is close to being taken over by a black knight. A white knight takeover is the preferred option to a hostile takeover by the black knight, as white knights make a friendly acquisition by generally…
M&A Glossary and Terms Welcome to CFI’s M&A Glossary of terms and definitions for mergers & acquisitions transactions. These terms are taken from CFI’s advanced financial modeling course on mergers and acquisitions modeling. General M&A Terms Accretion An improvement in per share metrics post-transaction (after issuing additional shares). Acquirer The firm that is purchasing a…
What is a Cash Rich Split Off? A cash rich split off is a merger and acquisition technique where a parent company exchanges the company’s stock for stock in a subsidiary of the company without incurring taxes, provided that the statutory requirements are met. The technique allows companies to dispose of non-core assets and emerge…
What is the ECM Deals Committee? The Equity Capital Markets (ECM) Deals Committee assesses the financial and business merits of any proposed New Equity Issue to determine whether a bank will become involved in the New Equity Issue. Most banks will not commit to any New Equity Issue without obtaining approval from the ECM Deals Committee….
What is a Sale and Purchase Agreement (SPA)? A Sale and Purchase Agreement (SPA) is a legally binding contract outlining the agreed-upon conditions of the buyer and seller of a property (e.g., a corporation). It is the main legal document in any sale process. In essence, it sets out the agreed elements of the deal,…
What is a Stock Acquisition? In a stock acquisition, a buyer acquires a target company’s stock directly from the selling shareholders. With a stock sale, the buyer is assuming ownership of both assets and liabilities – including potential liabilities from past actions of the target. The buyer is merely stepping into the shoes of the…
What is an Asset Acquisition? An asset acquisition is the purchase of a company by buying its assets instead of its stock. In most jurisdictions, an asset acquisition typically also involves an assumption of certain liabilities. However, because the parties can bargain over which assets will be acquired and which liabilities will be assumed, the…
What is a Poison Pill? A shareholder rights plan, more commonly known as a poison pill, is a company’s defense against a potentially hostile, or unsolicited, takeover attempt. The general idea of a poison pill is to dissuade any outside takeover attempt by either making the company less desirable or by typically diluting an acquirer’s…
