The company’s survival is always the prerogative of the company managers and share holders. Certain steps are usually done – both drastic and minimal to ensure that the company will stay on its productive status as soon as possible.
Companies could find themselves in trouble from time to time but they could survive the challenge as long as they look for ways to address the problem.
One of the known drastic steps companies do to survive is to agree on a merger. Basically a merger is a business transaction between two companies wherein they agree to combine their business operations for survival. This business transaction should benefit the companies involved in the transaction.
A merger always happens between a stronger company and a weaker company. The terms and conditions of a merger usually involved in the exchange of shares or, in very rare situation, cash and a combination of both.
When two companies exchange shares, the weaker company would be required to provide more shares in exchange for a single share of the stronger company.
A merger should never be confused with acquisition. Although they are often associated with each other, an acquisition is basically a takeover of another company while a merger is a combination of operations. When you see new leaders in the company, an acquisition just happened and merger happens when the company experiences restructuring.
A merger could be good or bad for your investment portfolio. The improvement of your portfolio is based on the future performance of the weaker company. The public will always take a look at the performance of the weaker company as they are treated as a gamble for improvement in output of a larger company.
Although it is treated as a merger wherein two companies put together their resources, the weaker company could easily bring down the larger company. The larger company would need to pressure the weaker company so that efforts are doubled. The weaker company basically gained something while the stronger company loses a part of their strong share because of the merger.
Your Voice in Merger
If you are a shareholder, you will most likely be informed about the merger. Technically, you are a part owner of the company because of the share that you own. That means you have to right to know anything major that will happen to the company. That includes mergers and acquisitions.
Not only you will be informed about the movement but you will be asked to vote if you are ok with the merger. Of course, your shares are still limited but collective voting will provide the CEOs an idea if the merger is a good move for the company or not.
Surviving the Merger
As a shareholder, you always have an option to get out by selling your shares. But you do not just get out if you know if the merger would be beneficial for your company.
The first thing you should look for is a document that tells of the performance of the merging company. You could find all the pertinent information that you need online and if you are willing to spend a little bit, you will have an in depth look of the financial status of the company.
What you should really look for are the fluctuations and situations that have forced the company to seek help and merge.
A merger could be good or be bad for your portfolio. As a shareholder, you will have an ample time to think about the merger and if you do not like the movement, you are always welcome to sell your shares. But look at the numbers and indicators of the merging company to have an educated guess if the merger will benefit your portfolio.