Question

When Dow Chemicals and DuPont, two chemical firms of relatively equal size in the United States, agreed to combine their assets, this was an example of a(n):

a) joint venture

b) acquisition

c) merger

d) equity agreement

Answer 1

An acquisition is when one company purchases most or all of another company's shares to gain control of that company. Purchasing more than 50% of a target firm's stock and other assets allows the acquirer to make decisions about the newly acquired assets without the approval of the company's shareholders. This is not the case here and therefore answer is not “acquisition”

Joint venture is a commercial enterprise undertaken jointly by two or more parties which otherwise retain their distinct identities. In this case parties cease to exists. Therefore joint venture is not the answer.

An equity agreement states the share of the business that each party owns. Generally established as part of a startup's founding agreement, This is also not the case in context.

A merger is an agreement that unites two existing companies into one new company. Here Dow chemicals and Du Pont merged their assets to become a single entity in the market, Therefore this is an example of the merger.

The correct answer therefore is “ c) Merger”