Merger, acquisition, and absorption: the types of M&A
M&A operations involve distinct structures, such as merger, acquisition, and absorption. Understanding these differences helps in choosing the most suitable path for each business objective.
What M&A means
The acronym M&A, standing for mergers and acquisitions, brings together operations of corporate reorganization and transfer of control. In Brazil, they usually rely on corporate legislation and on specific contractual instruments.
Main types of operation
Although the market uses the terms broadly, each structure has its own characteristics:
- Acquisition: purchase of a company's quotas, shares, or assets
- Absorption: one company absorbs another, which ceases to exist
- Merger: two or more companies unite to form a new one
- Spin-off: part of the assets is transferred to another company
How to choose the structure
The definition usually depends on factors such as the parties' objectives, tax treatment, contingencies, and continuity of activities. There is no single ideal structure; suitability depends on the specific case.
Common precautions in these operations
Regardless of the type, these operations tend to require prior assessment (due diligence), a clear definition of responsibilities, and well-drafted contractual instruments, in order to reduce risks and align expectations.
Frequently asked questions
What is the difference between a merger and an absorption?
In an absorption, one company absorbs the other, which is extinguished. In a merger, the companies unite to form a new one. The choice depends on the objectives and the specific case.
Is buying quotas different from buying assets?
Yes. Acquiring an equity interest transfers the company along with its liabilities, whereas buying assets usually involves specific items. Each path has distinct legal and tax effects.
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