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often dominates that process, and sometimes may in effect dictate the terms of the transaction, including the date the combination occurs. [FAS 164, paragraph A6, sequence 107]

958-805-55-5 The characteristics of the entities participating in a combination and of the resulting combined entity that can help to distinguish between a merger and an acquisition fit into the following two groups: [FAS 164, paragraph A7, sequence 108.1]



Governance and related control powers [FAS 164, paragraph A7, sequence 108.1.1] Financial capacity. [FAS 164, paragraph A7, sequence 108.1.2]

958-805-55-6 For example, one entity appointing significantly more of the governing board of the newly formed entity, retaining significantly more of its key senior officers, or retaining its bylaws, operating policies, and practices substantially unchanged is more likely to be a feature of an acquisition than of a merger. Similarly, the relative financial strength and relative size of the participants in the combination may help to determine whether one participant is able to dominate the process leading to the combination. For example, if one entity is financially strong and the other is experiencing financial difficulty, the stronger entity may be able to dominate the transaction, which would indicate that the transaction is an acquisition rather than a merger. Similarly, a participant that is substantially larger than each of the others in terms of revenues, assets, and net assets may be able to dominate the transaction. However, relative size, like relative financial strength and the other indicators discussed, is only one characteristic that may help to distinguish between a merger and an acquisition in particular situations—none of the indicators, by itself, is determinative. As discussed in paragraph 958-805-55-1, ceding of control is the sole definitive criterion for a merger. [FAS 164, paragraph A7, sequence 108.2]

958-805-55-7 Unlike an acquisition by a not-for-profit entity, a merger generally is accomplished by combining all of the assets and liabilities of the merging entities into a newly formed entity that assumes all of the assets and liabilities of the participating entities without a transfer of cash or other assets to those entities or any of their owners, members, sponsors, or other designated beneficiaries. Also, unlike the formation of a joint venture in which the venturers continue to exist and usually hold a financial interest, the creators of the merged entity cease to exist as autonomous entities and no one holds financial interests in the merged entity. Moreover, the merged entity generally has a perpetual life rather than a life that is limited by the period of the venture or that allows for one or more of the participating entities to opt out of the venture or other arrangement. [FAS 164, paragraph A8, sequence 109]

958-805-55-8 A particular combination of business entities may seem similar in some aspects to a merger of not-for-profit entities. For example, a new entity may be formed to effect a business combination, and no consideration is exchanged in some business combinations. Nevertheless, the guidance in this


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