A “surviving company” refers to the company that remains after a merger or acquisition has taken place. When two companies merge, one of the companies typically continues to exist, retaining its original name and identity, while the other company is absorbed into it and ceases to exist as a separate entity. The company that continues to exist post-merger is termed the “surviving company” or “survivor.”
There can be various reasons for determining which company becomes the surviving entity. Factors can include the relative size of the companies, brand recognition, the strategic goals of the merger, tax considerations, and more.
Example of a Surviving Company
Let’s delve into a fictional scenario involving two tech companies:
Two tech companies, “TechFlow Inc.” and “NexaSoft Ltd.”, decide to merge. Both companies offer cloud-based software solutions, but they cater to slightly different markets. TechFlow specializes in enterprise solutions for large corporations, while NexaSoft provides software for small to medium-sized businesses.
Reason for the Merger:
TechFlow wants to expand its market reach by tapping into the small to medium-sized business segment. NexaSoft, on the other hand, is looking for an opportunity to leverage TechFlow’s robust infrastructure and capital to enhance its software offerings. Both companies believe that their combined resources and client base can position them as a dominant player in the cloud-based software industry.
Decision on the Surviving Company:
After much discussion, both parties decide that the merged entity will operate under the “TechFlow Inc.” name for several reasons:
- Brand Recognition: TechFlow has a strong reputation in the industry and is well-known among large corporations.
- Size and Resources: Being the larger company, TechFlow has more extensive resources and a broader client base.
- Strategic Positioning: Retaining the TechFlow name signals to the market that the company, while expanding into new segments, remains committed to its core enterprise clientele.
After the merger is completed, NexaSoft Ltd. is integrated into TechFlow Inc. All of NexaSoft’s assets, liabilities, intellectual property, and workforce become part of TechFlow. NexaSoft ceases to exist as a separate legal entity.
TechFlow Inc., as the surviving company, now offers solutions tailored for both large enterprises and small to medium-sized businesses, making it a formidable force in the cloud software market.
This example illustrates how the process and decision-making can play out in a merger and why one company might be chosen as the surviving entity over another.