Bank of America and Merrill Lynch
Bank of America and Merrill Lynch
Business Combinations:
Dissolution of all but one of the separate legal entities is not necessary in order to have a business combination. A business combination is created when a number of separate organizations are tied together through common control, or an acquirer obtains control over one or more businesses.
Statutory merger: any business combination in which only one of the companies remains as a “survivor” or “parent”.
Statutory consolidation: a business combination in which two or more companies create a new separate entity. The original entities may or may not dissolve in such combination.
Goodwill is an asset representing the future economic benefits arising in a business combination that are not individually identified and separately recognized.
Goodwill does not affect net income. Rather, the acquirer recognizes it as an asset.
Bargain purchase is the fair value of the net assets acquired in excess of the consideration transferred in a business combination. In a bargain purchase situation the net asset fair value is the valuation basis for the combination and the parent company recognizes a gain in its income statement in the period the acquisition takes place. The parent will record the assets acquired and liabilities assumed in their fair market value and will credit the “Gain on Bargain Purchase” account.
Bank of America and Merrill Lynch
Bank of America completed the acquisition of Merrill Lynch on 1/1/09. Acquisition took place in exchange for common and preferred stock valued at $29.1 billion.
Bank of America also acquired Countrywide Financial, a mortgage servicing company, in 2008.
Bank of America is a retail bank, a credit card company, and a retail lender. Merrill Lynch is an investment bank and a wealth management and brokerage firm. The two companies did not have a large overlap in services; however, since both are in same industry, the merger that took place is horizontal
Business Combinations:
Dissolution of all but one of the separate legal entities is not necessary in order to have a business combination. A business combination is created when a number of separate organizations are tied together through common control, or an acquirer obtains control over one or more businesses.
Statutory merger: any business combination in which only one of the companies remains as a “survivor” or “parent”.
Statutory consolidation: a business combination in which two or more companies create a new separate entity. The original entities may or may not dissolve in such combination.
Goodwill is an asset representing the future economic benefits arising in a business combination that are not individually identified and separately recognized.
Goodwill does not affect net income. Rather, the acquirer recognizes it as an asset.
Bargain purchase is the fair value of the net assets acquired in excess of the consideration transferred in a business combination. In a bargain purchase situation the net asset fair value is the valuation basis for the combination and the parent company recognizes a gain in its income statement in the period the acquisition takes place. The parent will record the assets acquired and liabilities assumed in their fair market value and will credit the “Gain on Bargain Purchase” account.
Bank of America and Merrill Lynch
Bank of America completed the acquisition of Merrill Lynch on 1/1/09. Acquisition took place in exchange for common and preferred stock valued at $29.1 billion.
Bank of America also acquired Countrywide Financial, a mortgage servicing company, in 2008.
Bank of America is a retail bank, a credit card company, and a retail lender. Merrill Lynch is an investment bank and a wealth management and brokerage firm. The two companies did not have a large overlap in services; however, since both are in same industry, the merger that took place is horizontal