In the business world, it is common to hear about merger , split and incorporation of companies. These terms refer to ways of reorganizing or expanding business and frequently appearing in large business news. In recent years, several Brazilian companies have undergone split, merger or incorporation processes - a trend that intensified after the 2020 pandemic, resulting in even larger and more competitive companies. Understanding what each of these mechanisms means is important for entrepreneurs, investors and professionals, as each operation has different implications in terms of strategy, market and legal obligations .

It is also essential to understand these differences to make informed strategic decisions . A poorly planned fusion or an incorporation without proper assessment of active (valuation) can bring financial risks. Therefore, this article will doly explain what fusion, split and incorporation of companies are, with practical examples of Brazil and simple language, highlighting the differences between them and the importance of valuation in each process.

What is companies fusion?

Fusion occurs when more companies come together to form a new company . In this process, the original companies cease to exist individually , giving way to a new entity that assumes all the rights and obligations of the previous ones. In other words, it is as if the companies “A” and “B” die to give birth to the company “C”, combining all equity, operations and teams in a single business. It is not a simple process - it requires culture alignment, system integration and membership approval - but results can be very advantageous, such as market expansion, increased customer base and reinforced competitiveness .

To merge properly, it is necessary to evaluate the value of each company (do the valuation of the assets) and approve the operation at the shareholder assembly. Example: In 2009, Brazilian food companies Sadia and Perdigão performed a merger that gave rise to BRF (Brasil Foods), joining strong brands in a new company and gaining production scale. This classic case has shown how fusion can strengthen market position and improve operational efficiency.

Main benefits of fusion:

• Larger scale and expanded market: The resulting company now serves a more diverse market with a larger customer base.
• Increased brand revenue and range: By joining forces, an increase in revenue and brand presence in different regions or segments is expected.
• Cost and Risk Reduction: With integration, duplicity of functions is eliminated and operation is optimized, reducing expenses and direct competition between original companies.
• Improved synergies and efficiency: The combination of resources can improve processes, innovation and general conditions of acting of the new company.

(In short, the merger aims to create a stronger company than the two separately, taking advantage of synergies to grow jointly . )

What is split of companies?

The split is practically the opposite movement to the merger: a company divides , transferring part or all its equity to another company or forming new companies. In the split, a company “A” decides to separate a piece of its operations, active and passive and pass them to the company “B” (which may already exist or be created for this purpose). If all assets are transferred (total split), the original company is extinguished ; If only part of the equity is transferred (partial split), the original company continues to exist , but with reduced capital and operations. That is, the partial split results in two or more companies (the original, which remains, and the new or other existing ones that receive the quoted part), while in the total split the original company completely disappears.

Companies opt for split for several strategic reasons. Often, the goal is to reorganize and optimize business structure , either to focus on specific activities or to facilitate corporate issues. Typical bending advantages include favors tax planning - for example, separating a business unit can reduce tax burden or take advantage of tax incentives - and simplify family succession , allowing to divide business between heirs or partners more clearly. The split can also improve management by separating incompatible activities or different segments , making each company more focused on its market.

Example: The Gol airline held, in 2012, the split of part of its equity by transferring its Smiles mileage program to a new company, Smiles SA, which began to manage this business exclusively. In this case of partial split , Gol remained operating the flights, while Smiles SA was responsible for the customer loyalty program, each focused on its main activity. (Years later, in 2021, Gol chose to incorporate Smiles again, showing that these strategies can be reversed according to market needs, but this is another process.)

Main reasons and benefits of split:

• Tax Planning: Dividing the company can allow more advantageous tax treatments or segregation of liabilities, reducing tax risks.
• Succession and corporate: Facilitates family succession and corporate reorganization by separating businesses so that heirs/partners assume different parts of the company without conflict.
• Strategic Focus: makes it possible to separate distinct business lines , improving management and focusing on each resulting company (for example, separating a less profitable sector to make it independent or prepare it for sale).
• Restructuring and Efficiency: When scirring, the company can eliminate incompatible divisions and improve the definition of goals of each unit, making them more efficient in their specific markets.

What is incorporation of companies?

Incorporation is another type of corporate reorganization, in which more companies are absorbed by another . Unlike the merger, in the incorporation there is no new company ; Instead, an existing company (the developer ) is part of the equity of another company (s) (s) (the incorporated), which cease to exist . We can imagine the incorporation as the company “A” encompassing the company “B” completely - the company “B” is extinct and the company “A” continues to operate, now in size and expanded capabilities. The developer assumes all the responsibilities, rights and obligations of the incorporated company, which is legally ended. This process is provided for in Article 227 of the Law of Corporations (Law 6.404/76) and the Civil Code, and requires formal procedures, including evaluating the assets to be absorbed and elaborating protocol and justification documents of the operation.

Incorporation is very common in the business world as a rapid growth. Instead of building a new operation from scratch, the developer company acquires at one time the entire structure of another company , including its goods, customers, technologies, products and specialized team . With this, it instantly expands its portfolio and market presence. For example, large banks often incorporate smaller banks to increase their network: Banco do Brasil, in 2008, incorporated the State Bank Nossa Caixa, absorbing all agencies and customers. Another recent example was Natura, which in 2020 incorporated Avon's Global Cosmetics company, bringing Avon's operation into the Natura & Co group - this strategy expanded Natura's international performance and added new brands to its catalog (in this case, the Avon brand continued to exist in the market, but Avon was controlled by Natura & Co).

It is important to note that by incorporating another company, the company also inherits passive and obligations of the incorporated. For example, all debts, contracts and employees of the purchased company are automatically transferred to the developer, who must honor them. This may include labor obligations, open taxes and legal responsibilities, so Due Diligence (previous audit) and Valuation are vital steps before completing an incorporation.

Main impacts and benefits of incorporation:

• Immediate Expansion of Operations: The developer increases her assets, customer base and market share quickly by adding the other company's entire operation to its structure.
• Gain of assets, technologies and talents: goods, technologies, products and specialized staff are obtained , which can accelerate innovation and growth without having to develop internally from scratch.
• Increased scale and synergies: There is elevation in the production volume and market share of the incorporating company, as well as the possibility of eliminating redundances (such as departments that did the same function) and complementary skills, generating cost savings and operational efficiency.
• Competitive strengthening: With the incorporation, the resulting company (enlarged developer) becomes more robust to face competitors, as it added the incorporated resources and customers in its operations.

(Briefly, incorporation is a strategy to grow via acquisition , absorbing another company completely. It is a form of common expansion, but requires caution in the evaluation of the business to be incorporated.)

The importance of valuation in these processes

In any process of merging, splitting or incorporation, valuation plays a central role. Valuation is the term used for the value assessment of a company , that is, determining how objectively that business is worth. This process involves analyzing the assets and liabilities of the company, its financial performance, future cash flows, growth prospects and other relevant factors. The result of valuation is to establish fair value for the company or part of it - either for the purpose of selling, purchasing or corporate reorganization.

Why is valuation so important in these processes? Because it provides an objective basis for negotiating the values involved. In a merger or incorporation, for example, both parties need to agree on how much each business is worth the exchange of stocks or the price to be paid. Thus, a well -made valuation ensures that the negotiated price properly reflects the real value of companies, preventing one of the parties from paying an exaggerated amount or that the other receives less than it should. In addition, Valuation considers the expected synergies - that is, the financial benefits that the union of companies can generate - and helps incorporate these potential gains in calculating value.

In the case of a split, Valuation is also critical: it is necessary to evaluate the value of the equity portion that will be quoted to properly distribute the shares between the partners or set a price if that part is sold to another company. Legally , in the incorporations and mergers, Brazilian corporate legislation requires the elaboration of assessment of the asset evaluation (and may use accounting value or market value) before approving the operation. In other words, without a transparent and careful assessment, it is not possible to make the transaction safely and according to the standards.

It is noteworthy that valuation is not an exact science - different methods (such as discounted cash flow, multiple market, etc.) can produce different estimates. Therefore, it is recommended to have specialized and independent professionals to conduct Valuation. For example, a well -founded evaluation report brings confidence to shareholders and other parties involved, serving as an impartial guide in decision making. In short, valuation is the tool that brings objectivity and financial balance to fusion, split and incorporation processes, reducing risks and increasing the chances of success of the new business configuration.

Comparative table: fusion, split and incorporation

To summarize the differences between merger, split and incorporation , check out the comparative table below. It highlights, in general, the operation of each mechanism, what happens to the companies involved and an example to facilitate understanding:

Aspect	Fusion (union)	Split (division)	Incorporation (absorption)
General definition	Two or more companies come together to train a new company . The originals are extinct, emerging a totally new society.	One company separates part or all its assets and transfers the other company (s). It can result in new companies or existing companies just receiving assets.	One company absorbs another existing one. The incorporating company continues and increases in size, while the incorporated (s) no longer exists.
New resulting company?	Yes. The merger creates a completely new company, with new CNPJ/Identity, combining the previous ones in one.	It depends. In the partial split, the original company remains (diminished) and another company (s) receives the quoted part. In the total split, the original company is extinguished and its parts can form one or more new companies.	No. There is no new company creation; The incorporating company (pre -existing) remains with its identity, only assuming the business of what was incorporated.
Destination of the original companies	All companies that have founded themselves cease to exist separately; They "fuse" their identities in a new entity.	The “mother” company may continue to exist if the split is partial (only loses the transferred party) or ceases to exist if it is a total split. The spit parties are part of another company or train new companies.	The incorporated company ceases to exist (it is legally extinguished), while the developer company remains operating (now with the assets/businesses incorporated).
Main objectives	Unite forces to gain scale, synergy and market competitiveness. They usually seek joint expansion , cost reduction and increase revenue unifying operations.	Restructuring or focusing on the company, separating businesses for optimization. It can aim at tax benefits, facilitate succession or segment activities to make them more efficient and profitable.	Growing via the acquisition of another company, rapidly increasing assets, customer base and technologies. It seeks to expand market and efficiency integrating the acquired company, eliminating redundances and adding capacities.
Example in Brazil	Fusion: Sadia + Perdigão = BRF is born (2009), joining two food leaders in a new company.	Stock: Gol (airline) scirred its Smiles (2012) program, creating Smiles SA for this loyalty operation.	Incorporation: Banco do Brasil incorporated Banco Nossa Caixa (2008), absorbing its agencies and customers in the structure of BB.

Fusion, split and incorporation are three distinct paths

In summary, merger, split and incorporation are three distinct paths to restructure companies. Each mechanism has its advantages and consequences - either to expand market, focus strategies or acquire new features - and understanding these differences is crucial in business strategic planning.

It is important to highlight that there is no “better” model universally: the choice between merger, split or incorporation depends on the objectives of the company, the financial and market situation, and the legal and tax impacts involved. For example, a badly aligned fusion can generate management conflicts, while an unsuccessful split can weaken business that worked better together. Already an incorporation requires care to integrate different business cultures and deal with all the inherited obligations.

Before making any strategic decision of this size, seek specialized guidance. valuation experts such as Exxata and business consultants is critical to evaluating the viability of the operation and its implications. These professionals will assist in the risk analysis, the correct assessment of the business value and the fulfillment of all legal requirements. With appropriate knowledge, planning and counseling, fusion, split or incorporation processes can become successful movements that boost companies' growth and perpetuity. Therefore, inform yourself, plan and count on experts-this is the best way to ensure that corporate transformation reaches the desired results, strengthening the business for future challenges.