6 Difference Between Merger and Acquisition

Merger and acquisition are two business strategies in which two or more business firms and companies joined each other. The joining conditions, process and scope are different. When two or more companies or businesses join together, the mutual decision is known as mergers. This is done to decrease the competition between both the businesses. While acquisition is a strategy in which one big company purchases or acquires the other company which is smaller than the company which is purchasing.

The Simple meaning of merger is mutual combine of the two companies for profit. While acquisition is to get or acquire the other company with financial power. In merger by the combination of two companies which forms a new company with a new name and the infrastructure. Acquisition is the process of taking over the small business and takes control over the target company.

So, in business it’s very important to understand the concept of merger and acquisition. In this article we will discuss in detail about the merger and acquisition. We will also discuss the difference which separates merger and acquisition from each other. There are many aspects which are related to the merger and  acquisition. We will also discuss those aspects in this article.

Merger vs acquisition

Sr. No.	Merger	Acquisition
1	Combination two companies with mutual decision	Purchase the other company to increase market share.
2	Two companies combine and make the new one	Both the companies do not lose their existence.
3	The same nature and same size company merges together	A larger company acquires the small one.
4	Minimum three companies merged together	Minimum number of the companies is 2.
5	Voluntary Nature	May be voluntarily or involuntarily.
6	More legal formalities	Less legal formalities

Merger

When two companies combine with each other with mutual decision is known as merger. Both these companies with the combination make a new company with a new name. All infrastructure also changes. The merging of the companies is done to decrease the competition between both the companies and increase the operational efficiency.

The size of the new company which is established with the merger may be small or big. When the new company is formed by merging the two or more companies in this case all the legal formalities are done again. So, in the merger the legal formalities are more. Main purpose of the merging of the company is to combine the resources weakness and the strengths of both the companies. In the merger the person who has the shares in the old company gets the shares in the new one.

Types of the merger

1. Vertical
2. Horizontal.
3. Reverse.
4. Congeneric
5. Conglomerate

Example

1. Fortis Healthcare India and Fortis healthcare international.
2. Heinz and Kraft.
3. Glaxo wellcome and smith Kline.
4. AB InBev and SABMiller.
5. AT&T and Time Warner.
6. United Technologies and Raytheon.

What is acquisition

When a large-scale company purchases the other small company, it is termed as acquisition. Acquisition is purchases of the assets of other companies or acquiring the ownership more than the 51%. This is always done by the company which is greater than the other company.

The company which acquires the other company is termed as the acquiring company and the company which is acquired is known as the target company.

Acquisition is done to get the instant growth of the company. By this the operational area, Mark value and profitability of the acquiring companies increase very fast.

Types of the acquisition

1. Friendly.
2. Hostile.
3. Buyout.

Example of acquisition

1. Myntra by Flipkart.
2. Corus group by Tata steel.
3. Ranbaxy laboratories by sun Pharma
4. Android by Google
5. WhatsApp by Facebook
6. PayPal by eBay

Main Differencee Between Merger and Acquisition.

1. Merger combines two companies with mutual decision. Acquisition is to purchase the other company to increase market share.
2. In a merger two companies combine and make the new one. In acquisition both the companies do not lose their existence.
3. In merger mostly, the same nature and same size company merges together. In acquisition a larger company acquires the small one.
4. In mergers minimum three companies merged together. In acquisition the minimum number of the companies is 2.
5. Merger is voluntary while acquisition may be voluntarily or involuntarily.
6. In merger more, legal formalities. In acquisition less, legal formalities.

Conclusion

Merger and acquisition are the two business strategies in which companies joined together. Merging is the mutual decision of the company’s owners to come together. This is mostly done to reduce the competition in the market and increase the production and performance. While acquisition is the to take over the other company by purchasing its assets and ownership more than 51%. These days merging is decreasing and the acquisition is getting famous. Very few merging takes place these days. Everyone believes in the acquisition.

This is all about the merger and acquisition. Hope this article will be helpful for you. If you have any doubts please feel free to comment on us. For more interesting topics like this please go through our website.