CA Intermediate · Financial Management and Strategic Management · Strategic Choices
Two Indian pharmaceutical firms, Arogya Labs and Vitalis Pharma, agree to jointly set up a new company to develop and market a vaccine, sharing equity, risk and control equally, while both continue their separate businesses. This arrangement is best termed a:
This arrangement is a joint venture. Both firms create a new jointly owned company for a specific purpose, share equity, risk and control, and remain independent in their own businesses. A merger would combine them into one entity, which is not happening here.
- AMerger
- BJoint ventureCorrect
- CTakeover
- DDemerger
Explanation
Two firms forming a separate jointly owned entity for a specific purpose while remaining independent is a joint venture. In a merger the firms combine into one, and in a takeover one firm gains control of another. A demerger splits a company into parts.
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