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A merger is a legal combination of two (or more) companies into a single surviving or newly formed entity, usually with an exchange of shares rather than a one-way cash purchase.
Unlike an acquisition, a merger is not primarily “Buyer writes a cheque.” It is a corporate-law event: assets, liabilities and often contracts move to a survivor by statute or court scheme. Shareholders receive shares (sometimes mix-and-match cash) according to an exchange ratio.
“Merger of equals” is a political description. Accounting still identifies an acquirer under IFRS 3. Competition law may still treat the combination as a concentration.
Teams still run DCF and comparable work on both companies, then argue about the ratio:
Exchange ratio = Value per target share / Value per acquirer share
(using agreed valuation protocols, including control and synergy sharing).
Illustration only. Two hypothetical listed peers.
| NorthCo | SouthCo | |
|---|---|---|
| Shares out | 10.0m | 6.0m |
| Agreed equity value | €400m | €180m |
| Value per share | €40.00 | €30.00 |
| Implied ratio (South : North) | 0.75 North share per South share |
If synergies of €40m PV are credited 50/50, the ratio moves. Social issues — HQ, brand, CEO — often consume more board time than the 0.75.
Mergers concentrate governance risk: who controls the combined board, how earn-out-like deferred equalisation works, and what dissenters’ rights exist. Employees and counterparties care about the surviving employer ID.
True combinations of similarly sized groups; some regulated industries where a share sale of “the whole thing” is impractical; intra-group reorganisations (not market M&A, same legal toolkit).
Mid-market private companies rarely use statutory mergers for a cash exit — sellers want proceeds, not paper in a Newco. Cross-border mergers add the EU mobility toolkit or dual holding structures. Execution risk is high if cultures do not actually combine.
Dazur still requires a full valuation file on both combining businesses. A ratio without two structured models is a negotiation, not an analysis.