Abstract:
Although Merger and Acquisition are often used as synonymous terms , there is a difference between the two concepts. In case of Merger, two firms join and a new single identity is formed. But, in case of Acquisition, the stronger firm establishes its identity over the less powerful firm, which they takes over.Difference Between Merger and Acquisition is subtle. It is true that the terms Mergers and Acquisitions are used in a way that it seems, both are synonymous. But, the fact is that, there is a slight difference in the two concepts.
In case of a Merger, two firms together form a new company. After merger, the separately owned companies become jointly owned and get a new single identity. When two firms get merged, stocks of both the concerns are surrendered and new stocks in the name of new merged company are issued. Generally, Mergers take place between two companies of more or less same size. In these cases, the process is called Merger of Equals.
But, in case of Acquisition, one firm takes over another and establishes its power as the single owner. Here, generally, the firm which takes over is the bigger and stronger one. The relatively less powerful smaller firm loses its existence after Acquisition and the firm which takes over, runs the whole business by its' own identity. Unlike Merger, in case of Acquisition, the stocks of the acquired firm are not surrendered. The stocks of the firm that are bought by the public earlier continue to be traded in the stock market.
But, often Mergers and Acquisitions become synonymous, because in many cases, the big firm may buy out a relatively less powerful one and compels the acquired firm to announce the process as a Merger. Although, in reality an Acquisition takes place, the firms declare it as a Merger to avoid any negative impression.
Another difference between Merger and Acquisition is that, when a deal is made between two companies in friendly terms, it is proclaimed as Merger, even in case of a buy out. But, if it is an unfriendly deal, where the stronger firm swallows the target firm, even when the target company is not willing to be purchased, then it is called an Acquisition.
