What is a merger in corporate law?

In corporate law, a merger is defined as a legal consolidation of two or more corporations into one entity. This process typically involves one corporation absorbing another, with the surviving corporation continuing to exist while the absorbed corporation ceases to exist. The merged entity will operate under a single set of bylaws and governance structure, which streamlines operations and can lead to increased efficiencies.

The concept of a merger is fundamental to corporate restructuring, allowing companies to combine resources, capabilities, and market presence. This combination can create value through synergies, where the newly formed entity is worth more together than the individual companies were separately.

The other options do not accurately define a merger. An agreement between shareholders pertains to corporate governance and shareholder rights but does not encompass the legal and structural implications of a merger. A financial investment strategy relates to how investors approach their portfolios and is unrelated to the formal process of combining corporations. Lastly, while mergers can have tax implications, they are not primarily a method for reducing corporate taxation. Instead, this is a consequence that may arise depending on how the merger is structured and executed.