Differentiating Merger and Acquisition


 
The term merger and acquisition have always been used intangible but they mean two different things. The term merger is used to refer to the combining of two companies to form one while the acquisition is used to refer when a company takes over or acquires the other. M&A can be used to refer to merger and acquisition. To learn more about  Mergers and Acquisitions, visit  Eli Global. The concept that underlies this is the fact that the value for the shareholders is more than that of the total of the two companies alone. The terms can be used alternatively; however, they have a slight difference in the meaning.

An acquisition is a process when a company buys another. It can be a friendly takeover, or hostile. When a friendly acquisition is done, the company executives get to negotiate while in a hostile takeover, the bidder continues to seek the acquisition even if the target company is not willing to agree. It is normally the larger companies that take over the smaller companies. Though, in some situations, you will find smaller companies taking over the large companies and only keeps the name of the new firm that is formed after the acquisition. This types of acquisition can also be called reverse merger.

A merger is only considered valid when two companies come to an agreement to become one, as it is supposed to be a mutual decision. In the merging process, the companies agree to become one and continue to operate as one company and not two. Due to these reasons, these are an issuance of stock of the new company and those for the old companies are surrendered. The merger can be conglomerate or congeneric, horizontal, or vertical. It will, therefore, depend on the nature of the companies involved in the merger process. 

Horizontal merging is where two companies competing in the same product merge to form one bigger company. In the vertical merger, two different with same products lines come together to form one company with aim of enhancing the company's value. Lastly, the conglomerate merger is when two companies merge and they do not have a similar product line. To learn more about  Mergers and Acquisitions, click Eli Global Press. It depends on how the merger has been financed, it can be consolidation or purchase merger. The former can be defined as a merger in which a target company is bought by the bidder, and the latter is recognized as a merger in which the new firm is established by having both the companies brought together.

Therefore, with the above difference, you can be sure of which company you are forming, either a merger or an acquisition. Never be confused and regret later when you are involving your company to form another bigger one.Learn more from   https://www.encyclopedia.com/books/educational-magazines/mergers-and-acquisitions.