What is a merger?

A merger refers to the combination of two or more companies into a single entity, which allows the merged company to operate as one unified organization. This process typically involves one company absorbing another, or two companies coming together to form a new entity.

Mergers can provide several advantages, including increased market shares, enhanced financial performance, operational efficiencies, and the potential to enter new markets. This strategy is often pursued to consolidate resources, enhance competitive abilities, or achieve growth that may be difficult to achieve independently.

In contrast, the other choices describe different corporate activities that do not capture the essence of what a merger is. For example, restructuring corporate debts focuses on the financial reorganization of an entity’s existing obligations; creating new shares pertains to equity financing and ownership stake matters; and liquidating a corporation's assets refers to the process of closing down a business and selling its assets, which is fundamentally contrary to the nature of a merger, where businesses typically aim to continue operating together. Thus, understanding the nature of mergers as fundamental combinations of companies is crucial for grasping corporate law concepts.