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· Posted on
February 21, 2024

What’s a merger?

Ah, when two become one. It’s a beautiful thing, Flux fam.

What's the key learning?

  • A merger happens when two companies combine (aka merge) to form one big company. 
  • Unlike an acquisition, mergers are generally completely voluntary, and both companies generally come out equally on top. 
  • Existing shareholders in the original companies will be given an equal amount of shares in the new, merged company.

Ah, when two become one. It’s a beautiful thing, Flux fam.

A merger happens when two companies combine (aka merge) to form one big company. 

Unlike an acquisition, mergers are generally completely voluntary, and both companies generally come out equally on top. 

Why do companies merge?

There are heaps of reasons why companies merge, including:

  • To expand their reach
  • To expand into new market segments
  • To gain market share
  • To reduce their cost of operation.

What happens to shareholders after a merger?

If Company A and Company B merge to form Company AB, shares of Company AB will be distributed to the existing shareholders of Company A and B.

And generally, shares in Company AB are worth more than shares in the individual company, which actually leaves shareholders better off in the long term. 

TPG and Vodafone

Remember when TPG merged with Vodafone in 2020 to form TPG Telecom? TPG stood to gain a whole new market segment (mobiles), while Vodafone jagged TPG’s super speedy internet infrastructure. 

They also achieved $38 million in “cost synergies”, which are when companies that join together save cash on double-ups (i.e. if both companies have a sales team, and they merge, they will likely lay-off staff as a result and save costs).

TPG shareholders received one share in the new merged company from every share they held in the old company. 

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