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whenever we hear them. But, Are they both one? The answer is no, Merger
means to combine while Acquisition means to acquire. In business
terminology, Merger is a type of Amalgamation where two entities combine
to form a new entity. But, if we talk about Acquisition, it is similar to a
takeover, in which one company acquires another company. In this article, we
have compiled the important differences between Merger and Acquisition, in
tabular form.
1. Comparison Chart
2. Definition
3. Key Differences
5. Conclusion
Comparison Chart
Meaning The merger means the fusion of two or more than two
to form a new company.
Definition of Merger
Merger refers to the mutual consolidation of two or more entities to form a
new enterprise with a new name. In a merger, multiple companies of similar
size agree to integrate their operations into a single entity, in which there is
shared ownership, control, and profit. It is a type of amalgamation. For
example M Ltd. and N Ltd. jJoined together to form a new company P Ltd.
The reasons for adopting the merger by many companies is that to unite the
resources, strength & weakness of the merging companies along
with removing trade barriers, lessening competition and to gain synergy. The
shareholders of the old companies become shareholders of the new company.
The types of Merger are as under:
Horizontal
Vertical
Congeneric
Reverse
Conglomerate
Definition of Acquisition
The purchase of the business of an enterprise by another enterprise is known
as Acquisition. This can be done either by the purchase of the assets of the
company or by the acquiring ownership over 51% of its paid-up share capital.
Most of the firm uses the acquisition strategy for gaining instant growth,
competitiveness in a short notice and expanding their area of operation,
market share, profitability, etc. The types of Acquisition are as under:
Hostile
Friendly
Buyout
3. Two companies of the same nature and size go for the merger. Unlike
acquisition, in which the larger company overpowers the smaller company.
Conclusion
Nowadays, only a few numbers of mergers can be seen; however, acquisition is
getting popularity due to extreme competition. The merger is a mutual
collaboration between the two enterprises in becoming one while the
acquisition is the takeover of the weaker enterprise by the stronger one. But
both of them gain the advantage of Taxation, Synergy, Financial Benefit,
Increase in Competitiveness and much more which can be beneficial, however
sometimes adverse effect can also be seen like an increase in employee
turnover, clashing in the culture of organizations and others but these are rare
to happen.