What happens when two or more companies combine to form a new company?

When two or more companies combine to form a new company, this process is referred to as a merger. A merger typically involves the consolidation of assets, liabilities, and operations of the involved companies into a single, new entity. In this scenario, the original companies lose their individual identities and a new company is established that represents the interests of all the merging parties.

Mergers can occur for various reasons, such as achieving economies of scale, expanding market reach, or combining resources for greater innovation and competitiveness. The outcome usually aims to create enhanced operational efficiencies, increased market share, and improved financial performance, harnessing the strengths of each company involved.

The other terms mentioned are distinct processes. An acquisition is where one company takes over another, often maintaining its existing structure and identity, while a spin-off refers to creating a new independent company by separating part of the existing company. A divestiture involves selling off a portion of a company's assets to focus on core operations. Each of these processes has different implications and outcomes compared to a merger, which is characterized by the creation of a new unified entity.