Chapter 1 1 CHAPTER ONE – INTRODUCTION TO BUSINESS COMBINATIONS I. BUSINESS COMBINATIONS A business combination occurs when the operations of two or more companies are brought under common control. Merger activity over time is presented in Illustration 1-1 Part A. II. NATURE OF THE COMBINATION A. Nature of the combination 1. In a friendly combination, the boards of directors of the potential combining companies negotiate mutually agreeable terms of a proposed combination. The proposal is then submitted to the stockholders of the involved companies for approval. 2. An unfriendly (hostile) combination results when the board of directors of a company targeted for acquisition resists the combination. A formal tender offer enables the acquiring firm to deal directly with individual shareholders.