When one firm buys another firm and the firm that was bought is absorbed by the purchasing firm,a(n)_______________________ occurs.

Question

Quizplus · Accepted Answer

When one firm buys another firm and the firm that was bought is absorbed by the purchasing firm, it is called an acquisition. A merger is slightly different in that it involves the joining of two equal companies to form a new entity, whereas in an acquisition, one firm takes control of another. A buy-out is a type of acquisition where a group of investors or a single individual buys a controlling interest in a company. A stock swap is a type of acquisition where the purchasing firm offers its own stock as payment to the shareholders of the firm being bought. However, in the scenario described, the firm being bought is absorbed by the purchasing firm, indicating a straightforward acquisition.

When One Firm Buys Another Firm and the Firm That