Merger. v. Acquistion

A merger and an acquisition are both forms of business consolidation, but they have distinct characteristics:

Merger:

• Definition: A merger is a combination of two companies to form a new entity.
• Process: Both companies agree to integrate their operations on relatively equal terms, often resulting in a new company name and new stock.
• Outcome: The original companies cease to exist as separate entities, and a new company emerges.
• Example: Company A and Company B merge to create Company C.

Acquisition:

• Definition: An acquisition is when one company purchases another company.
• Process: The acquiring company takes over the target company. This can be done through the purchase of the target company’s shares or assets.
• Outcome: The acquired company may continue to operate as a separate legal entity, or it may be absorbed into the acquiring company. The acquiring company maintains its name and control.
• Example: Company A acquires Company B, and Company B becomes a part of Company A, or operates as a subsidiary.
  Key Differences:
• Control: In a merger, control is typically shared between the merging companies. In an acquisition, control is taken by the acquiring company.
• Structure: Mergers usually create a new entity, while acquisitions do not necessarily create a new entity.
• Financial Terms: Mergers are often considered a union of equals, whereas acquisitions involve one company taking over another.