merger

The combining of two (or more than two) organizations that results in the creation of a new legal and economic entity. In contrast to an *acquisition, a merger generally implies a voluntary combination by both parties. Following a merger, a new organization emerges that tends to reflect the character of both premerger organizations, and the *stockholders of merging corporations tend to share on an equal footing the risks and rewards of the newly created entity. However, in practice, one party to a merger often dominates a merger arrangement. Most forms of *Generally Accepted Accounting Principles (GAAP) tend to strictly differentiate mergers from * acquisitions, and under most forms of GAAP the accounting treatment of mergers does not normally give rise to *goodwill. In many jurisdictions, large corporate mergers that concentrate market power and reduce *competition are frequently reviewed by regulatory authorities. Mergers have been common among large accounting firms in recent years. In 1998, for example, Coopers & Lybrand merged with Price Waterhouse to create a new firm, *PricewaterhouseCoopers. Further reading: Davison (2001); Selim et al. (2002)