Mergers and AcquisitionsMergers and acquisitions (M&A) and corporate restructurings make up a large part of the world of corporate finance. Every day, Wall Street investment bankers arrange mergers and acquisitions deals, which bring together separate companies to form larger ones. When not creating large companies from small ones, corporate finance deals do the opposite and divide companies through spinoffs, spinoffs, or follow-on stocks. Mergers and acquisitions can dictate the fate of the companies involved for years to come. For a CEO, leading an M&A can be the highlight of a career. The key principle of buying a company is to create shareholder value beyond that of the sum of the two companies. Two companies together are more valuable than two separate companies – at least that's the reasoning behind mergers and acquisitions. This logic particularly appeals to businesses when times are tough. Strong companies will act to buy other companies to create a more competitive and profitable business. Companies will band together in hopes of gaining greater market share or achieving greater efficiency. Because of these potential benefits, target companies often agree to be acquired even though they know they cannot survive on their own. When one company takes over another and clearly establishes itself as the new owner, the purchase is called an acquisition. From a legal perspective, the target company ceases to exist, the buyer "swallows" the company, and the buyer's shares continue to trade. A merger occurs when two companies, often of the same size, agree to move forward as a target company. one new business rather than remaining separately owned and operated. This type of action is more accurately called “merger of equals”. The shares of both companies are sold and new shares of the company are issued in their place. For example, Daimler-Benz and Chrysler ceased to exist when the two companies merged and a new company, DaimlerChrysler, was formed. In practice, however, true mergers of equals do not happen very often. Usually, one company buys another and, as part of the terms of the deal, simply allows the acquired company to proclaim that the action is a merger of equals, even though it is technically a acquisition. Redemption often has negative connotations. Therefore, by describing the deal as a merger, negotiators and managers are trying to make the takeover more palatable. A takeover transaction will also be called a merger when both CEOs agree that coming together is in the best interests of the company. best interest of both their companies.