What occurs during a merger?

During a merger, the correct answer reflects a scenario where one firm is absorbed and ceases to exist. This signifies that the merger typically results in the acquisition of one company by another, leading to the dissolution of the acquired firm’s legal identity. The acquiring company often retains its name and operational framework, while the absorbed firm’s branding and operational structure may be integrated into the larger entity, or they may be completely phased out in favor of the acquirer’s standards and practices.

Such a situation often arises in strategic moves where a company looks to consolidate its market position, gain new technologies, or enter new markets by integrating another company that provides value in those areas. This absorption is designed to streamline operations and maximize synergies between the two entities.

The other scenarios, while relevant in discussions about business combinations, do not accurately represent the outcome of a traditional merger where absorption is involved. For instance, retaining identities separately applies more to a situation where firms remain distinct and collaborate rather than merge. Forming a new entity while dissolving existing ones can describe certain mergers or acquisitions, like in a merger of equals, but also misses the focus on absorption. Liquidating assets is a more drastic approach typically associated with acquisitions where the acquirer decides to shut down the acquired