The Difference Between Merger & Acquisition.
The term “merger” literally means merging of two organizations into one; term “acquisition” means to takeover or something acquiring. Moreover, there are some people who would call the two terms as M&A since the two terms are usually combined into one. However, the combination of both merger and acquisition is not just a normal thing because it means that the value of a shareholder is greater than the value of the sum of two companies. Although the two terms are used alternatively, their meaning still have a difference.
An acquisition means that, it is buying one organization by another. There are only two approaches in an acquisition, it can only be either a friendly approach or a harsh one. There are also times in a friendly acquisition where the executives of a company would just prefer to negotiate, however, if they are in a hostile approach, the bidder will still insist to seek it even if the company is already willing to disagree. It has also been known that those large companies take over those smaller companies due to different reasons. 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.
However, there are also times where the two organizations would agree on a decision of becoming one, and it is called as a mutual decision between the two organizations. The good thing about a merger is that, the two organizations agreed to become one and work as one rather than working on separate ways. 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. It can only be referred to as a horizontal merger if the two companies have competed in the same product line. However, the vertical merger means that the two companies of different product line have already dealt with each other that their products could enhance the value of a company, thus, resulting to a merger. Finally, you can call a merger as a conglomerate merger if the two companies have different product lines but still decides to merge with each other. It can also be called as a consolidation or a purchase merger.