ALL >> Business >> View Article
Difference Between Merger And Acquisition
The term "merger" literally means merging of two organizations into one; term "acquisition" means to takeover or something acquiring. Merger and acquisition is also referred to as M&A. The concept behind this combining is a fact that the value of shareholder is above than that of the sum of two companies alone. Both the terms are used alternatively, but they have a slight difference in their meaning.
An acquisition is buying one organization by another. It can be a friendly takeover or hostile takeover. In friendly acquisition, companies executives negotiate whereas in hostile acquisition, if the bidder continue to seek it even if the company (or target) is unwilling to agree. Usually larger company takes over the smaller company. However in some situations a smaller company might overtake the larger one and only keeping its name for the new firm which is the result of acquisition. This type of acquisition is called reverse merger.
A merger is said to be when two organizations agree on the decision of being one; it's the mutual decision. In a merger, organizations agree to be as one organization and continue ...
... as one rather than as two separate organizations. As a result the newly merged firm's stocks are issued and stocks of old companies (the stocks of two companies before merging) are surrendered. The merger can be horizontal merger, conglomerate (or congeneric) merger or vertical merger; it depends on the merging companies nature. If the two companies which have decided on merging compete in same product line it is said to be horizontal merging. If two companies of different product line agreed on a merger such that there products together enhances the company's value is said to be vertical merger. At last, the companies that do not have similar product lines at all decided to merge; this type of merger is called conglomeration merger. Depending on how merger has been financed it can be categorized as purchase mergers and consolidation mergers. The former is defined as a merger in which a company (target) is purchased by the bidder; the latter is defined as a merger in which a new firm is established by bringing together both the firms.
The kind of purchase done decides whether the purchase is a merger or acquisition. The purchase could be friendly purchase or hostile purchase; however this alone is not enough. Even if the top management agrees on the fact that this combining of two firms is in favor of both then also the purchase is said to be a merger.
Copyright © Nick Mutt, All Rights Reserved. If you want to use this article on your website or in your ezine, make all the urls (links) active.
Read information on BCG Growth Share Matrix and SWOT Analysis Method. Also read Steps in Strategic Planning Process to achieve better organizational goal.
Add Comment
Business Articles
1. Catering Services In Noida For Every OccasionAuthor: Catering Services in Noida
2. Leading The Way In Business Continuity Management System (bcms) In Uae And Dubai
Author: kohan
3. Manila Rope: A Versatile Solution For Various Industries In The Uae
Author: yasirsheikh1891
4. Exploring Asian Clothes Online: A Guide For Uk Shoppers
Author: Dazzle and Bloom
5. Maximizing Your Email Marketing Roi: A Comprehensive Guide
Author: tim seifert
6. Spray Paint: The Ultimate Solution For Versatile And Efficient Painting
Author: yakubali7842
7. High-quality Thrust Needle Roller Bearings: Essential For Reliable Performance
Author: psbearings
8. Web Design Company In Coimbatore
Author: cp
9. Top Needle Roller Bearing Manufacturer: Quality You Can Rely On
Author: psbearings
10. Discover The Best Rfid Tags For Your Industry Needs At Id Tech Solutions
Author: Shivam Kumar
11. Translation Company In India
Author: Lingosolution
12. Why Perlau Gwyn Dental Care Is The Top Choice For Dentists In Cardiff And Teeth Whitening Services
Author: Rebecca Brown
13. Hybrid Inverters & Their Diverse Applications
Author: blogswalaindia
14. The Role Of Solar Panels In Sustainable Living
Author: blogswalaindia
15. Solar Energy And Battery Storage: What You Need To Know
Author: blogswalaindia