LESSON 6:
MERGER
MEMBERS:
DELOS SANTOS, MARY
JEAN R.
PAGARAN, ELLA JANE F.
GALISANAO, MARIA FLOR
FORMENTO, ASHLEA
JULIE R.
LEARNING OBJECTIVES:
• After reading this chapter, you will be able to:
• 1. Discuss the nature of mergers
• 2. Identify the necessary steps in a merger
• 3. Enumerate the Securities and Exchange
Commission's requirements for mergers
• 4. Explain the motives behind mergers
2
INTRODUCTION
In the dynamic world of business finance, mergers
represent a strategic tool through which companies
combine to enhance competitiveness, expand market
reach, and achieve operational efficiencies. A merger
typically involves two firms of similar size joining forces to
form a new entity, allowing them to pool resources,
streamline operations, and capitalize on synergies that
drive growth and shareholder value. Understanding the
financial, legal, and strategic implications of mergers is
essential for navigating the complexities of corporate
restructuring and evaluating the long-term impact on
MERGERS AND
CONSOLIDATIONS
MERGERS
As defined by the Rules on Mergers and
Consolidation, a merger is the absorption of
one or more corporations by another existing
corporation, which retains its identity and
takes over the rights, privileges, franchises,
and properties of the absorbed corporation(s).
The absorbing corporation continues its
existence while the life or lives of the other
corporation(s) is/or are terminated.
MERGERS
• As a result of the merger, Surviving
Company acquires all the assets and assumes
all the liabilities of the Absorbed.
• As a consequence of the transfer, shares of
stock are issued to the stockholders of the
absorbed company.
• This necessarily results in the termination of
the existence or the dissolution of the
absorbed company or companies
MERGERS AND
CONSOLIDATIONS
CONSOLIDATION
The union of two or more to form a new
corporation, having the combined rights
privileges, franchises and properties of the
constituent corporations companies, all
combining to lose their corporate existence It
is briefly described as the union of two or
more corporations into a single new
corporation, all the constituent corporations
thereby ceasing to exist as separate entities.
CONSOLIDATION
• Consolidation has been effected when an
entirely new corporation is organized for the
specific purpose of taking over the business of
two or more existing corporations.
• In a merger, one of the old corporations is
retained as the surviving company.
• Merger and consolidation are usually used
inter-changeably.
PROCEDURES TO
ACCOMPLISH A MERGER
STEP 1 STEP 2 STEP 3
Meeting of the board of Notice of meeting to the Meeting of the
directors or trustees of stockholders of each of the stockholders of each of
each of the constituent constituent corporations; the constituent
corporation to approve sent at least two (2) weeks corporations approving
the plan of merger; prior to the date of the the plan of merger by at
meeting, either personally least two-thirds of the
or by registered mail at the outstanding capital stock
post office of the address of of each corporation.
the member as appearing in Dissenting stockholders
the corporate or can exercise their
membership book, stating appraisal rights;
the purpose of the meeting
and including a copy or
summary of the plan of
merger;
PROCEDURES TO
ACCOMPLISH A MERGER
STEP 4 STEP 5 STEP 6 STEP 7
Execution of the Submission of said If necessary, the Issuance of a
formal agreement articles of merger to SEC shall set a certificate of
which is the the SEC for hearing, notifying merger. The same
articles of merger approval; all corporations procedure holds
by the duly concerned at least true for
authorized officers two (2) weeks consolidation
of each before; purposes.
constituent
corporation;
Sec. 77 of the Corporation Code
specifically provides that the plan to
merge or consolidate must be approved
by the majority of the board of directors
or trustees of the constituent
corporations and ratified by the
affirmative vote of the stockholders
representing at least two-thirds (2/3) of
the outstanding capital stock or two-
thirds (2/3) of the members of each of
SEC REQUIREMENTS FOR MERGERS
I. Articles of Merger signed by the President or Vice
President and certified under oath by the Secretary or
Asst. Secretary of the constituent corporations setting for
the following:
A. The plan of the merger;
B. As to stock corporation, the number of shares
outstanding, or in the case of non- stock corporations, the
number of members,
C. As to each corporation, the number of outstanding
shares or members voting for and the names of
SEC REQUIREMENTS FOR MERGERS
D. Copies of the minutes of the board of directors'
meeting and minutes of the stockholders' or members
meeting of the constituent corporations, approving and
ratifying the plan of the merger, certified under oath by
the respective secretaries or assistant secretaries;
E. Audited financial statements of the constituent
corporations as of a date not earlier than 120 days prior
to the date of filling of the application;
F. Long-form audit report (for absorbed company(ies), of
surviving company if it has capital deficiency;
SEC REQUIREMENTS FOR MERGERS
G. List and consent of creditors who shall be adversely
affected by the merger;
H. List of stockholders of constituent companies showing
the names, number and amount of shares subscribed to
and amount paid by each, certified by the respective
Corporate Secretary;
I. Affidavit of publication of the notice of merger if one of
the constituent companies has capital deficiency; and
J. Company Data Maintenance Form.
MOTIVES OF MERGERS
1. Economies of scale - a decrease in the total cost of the
company (the fixed cost per produced unit fall) and
increase in the value of the firm; include tax savings;
2. Overcome financial difficulty - a joining together of
weak and shaky companies to give life to a financially
bigger and stronger company;
3. Less competition or achieve bigger market share;
4. Diversification
TYPES OF MERGERS
1. Horizontal mergers - two firms that operate and
compete in a similar kind of business;
2. Vertical mergers - firms in different stages of
production/ operation. Vertical mergers integrate the
production process and capitalize on the demand for the
product;
3. Conglomerate mergers - effected among firms that are
in different or unrelated business. These are also called
concentric mergers. These mergers increase the product
line and control a range of activities in various industries
that require different skills.
THANK YOU!