When mergers and acquisitions occur, there's a number of things that may seem chaotic and out of control. The more one knows, the more comfortable he or she is likely to feel as such upheavals are taking place. As a result, learning the key terms of mergers and acquisitions is a smart idea, as it can allow for more calming and relaxing experiences during potentially stressful times.
Acquisitions occur when one company controls or assumes control over another company. In many instances, acquisitions are affected by agreements, purchases made on the open market or a takeover.
Friendly mergers take place when two companies are willing to negotiate the terms of their merging or acquisition. There is a willingness and general consent in place for the acquiring company and the experience is generally free of hostilities.
Hostile takeovers occur when companies, individuals or entities silently and unilaterally pursue another company in order to take it over. This is done against the wishes and consent of the company's management that is to be acquired. In some cases, a proposal may not be made and a hostile takeover is also known as a raid or a takeover raid.
A quick ratio or a quick asset ratio, also known as the acid test ratio, measures a company's liquidity. This measures short-term liquidity and excludes current assets and inventories. The calculation for such is the cash and cash equivalents added to the trade receivables and then divided by the total current liabilities of the company.
Lockup provisions are put in place when buyers attempt to prevent their targeted company or entity from selling to a competitor prospective buyer. This is done through contractual restrictions, known as lockup provisions.
Accretion and dilution
Accretion and dilution are different types of acquisitions. An accretion, or accretive acquisition, increases a share's earnings. To the contrary, a dilution or dilutive acquisition in one in which the earnings have been decreased.