Future Business Leaders of America (FBLA) Business Law Practice Exam

What is a merger in corporate terms?

1. When two companies operate independently

2. When companies remain separate but collaborate

3. Two companies join, retaining one identity

4. One company acquires another entirely

The correct answer is: Two companies join, retaining one identity

A merger in corporate terms refers to the scenario where two companies join together, resulting in the retention of a single corporate identity. This process typically involves the combination of assets, liabilities, and operations of both entities, fostering a unified organization that can leverage synergies for enhanced efficiency, competitiveness, and market share. In a merger, the companies involved often negotiate terms that allow them to blend their resources, personnel, and expertise while forming a new entity or continuing under one of the existing company's names. This differs from other arrangements, such as acquisitions or partnerships, where the companies might retain distinct identities or operational independence. A merger signifies a deeper integration than merely collaborating or operating alongside one another, which is why it is characterized by the mutual decision to combine efforts and exist as one cohesive organization.