Mergers and Acquisitions (M&A) Key Terms

Navigate the rough seas of mergers and acquisitions through the understanding of industry terminology

By Christine Foley

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.

Acquisition

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.
Try: A list of Oracle's acquisitions over time can be learned about and explored at Oracle.com.

Friendly mergers

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.
Try: DarkReading.com explores the friendly merger of Tumbleweed and Axway.

Hostile takeover

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.
Try: The specifics of a hostile takeover are explained at Slate.com.

Quick ratio

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.
Try: A full explanation of quick ratios and their methodology can be found at ValueBasedManagement.net.

Lockup provisions

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.
Try: The propensity for businesses to implement lockup provisions is explored at CNET.com.

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.
Try: Find an explanation of accretion and dilution at iBankingFAQ.com.