Some terms for corporate change are erroneously used interchangeably, but the reality is that the subtle differences have grave legal implications. The following is a brief list of terms relevant to corporate change and the appropriate definition for each. An acquisition is the acquiring of control of one corporation by another. An acquisition may be by agreement or it may be the result of a hostile takeover. The acquisition may be in the form of cash, stock, or other assets.
Consolidation occurs when two or more organizations are combined into one new legal entity.
Presumably, with consolidation, each former corporation enters into the new venture on equal footing. Hostile takeovers are regulated by the federal Williams Act, state takeover statutes, and common law principles of target management duties. Often, the initial public offering is the first stage of the creation of a new publicly held corporation. Usually there is a complete restructuring of the corporation's balance sheet with the transfer of ownership. A liquidation is the conversion of assets into cash with the intent of paying off creditors and distributing the balance to corporate owners.