Difference between Acquisitions and Mergers

Abstract:

Acquisitions and mergers both allude to the joining of at least two business elements that involve the rebuilding of their corporate structure or order. They are pointed toward accomplishing better collaborations and synergies inside the association to expand their capability and proficiency. Notwithstanding, there are key contrasts between acquisitions and mergers as far as inception, methodology, and result.

An acquisition is a circumstance wherein a bigger, monetarily more grounded association assumes control over a more modest one. The latter stops existing, and the entirety of its tasks and resources are procured by the bigger business venture. Then again, a merger happens when individual associations choose to join their powers and bring about another business substance.

Meaning of Acquisition:

An acquisition involves one association or a business entity gaining or acquiring another business. The acquirer should buy no less than 51% of the objective or target the organisation’s stock to take control over it. It, for the most part, happens between two organisations that are not equivalent in stature: a monetarily more grounded business entity by and large gains a more modest or smaller one, relatively a more fragile one. It isn’t required for the choice to be a common one or mutual consent; when an organisation assumes control over the activities of one more without the acquiring firm’s option’s assent, it is named as a hostile takeover.

The smaller organisation proceeds with its activities under the name of the bigger one. The acquirer can decide to either hold or lay off the staff of the procured or acquired organisation. Indeed, the obtained organisation stops to exist in its past name and works under the name of the securing organisation; only under a few circumstances the gained or acquired organisation will hold its original name, and no new shares are offered.

The thought processes or motives in securing are like those for mergers. The fundamental point is to acquire a superior market competitive advantage by joining assets with another association.

Meaning of Mergers:

Whenever at least two individual organisations combine to shape another business, it is known as a merger. The merged business entity, for the most part, takes on another name, possession or ownership, and the management and its systems that are made out of workers or employees from the two organisations. The choice to merge is shared all the time or of mutual consent since the consolidating organisations join their powers to look for specific advantages, even at the expense or cost of weakening or diluting their singular business powers. There is typically no trade of money.

The rationale in consolidations or mergers might be to gain entry into new markets and niches, diminish operating costs, increase revenues, expand profit margins, and widen their market share. The business entities to the agreement or contract are by and large comparative as far as the scale of operation and size, and they treat each other as equivalents. A merged organisation offers new shares, and the shares are disseminated proportionately among existing investors of both parent organisations.

Difference between Acquisitions and Mergers:

ACQUISITIONS

MERGERS

Meaning

An acquisition is a cycle wherein one organisation assumes or takes over the responsibility for another organisation.

A merger is a cycle wherein more than one organisation’s approach functions as one.

Issuance of Shares

No new shares are issued in case of acquisitions.

New shares are issued in case of mergers.

Mutual Consent and Decisions

The choice of acquisitions is probably not shared, or of mutual consent in nature; in the event that the acquiring organisation assumes control over one more venture without the acquired company’s assent, it is named an unfriendly takeover or hostile takeover.

A merged business entity is settled upon by common assent and mutual consent of the involved organisations. Rather it is a planned and friendly one.

Company’s Name

The obtained or acquired organisation, for the most part, works under the name of the parent organisation. Sometimes, nonetheless, the previous company can hold its original name, assuming the parent organisation permits it.

The merged business entity works under another name or a new name.

Stature, by Comparison

The acquiring organisation is independently stronger in terms of financial capability than the acquired business.

The merged companies are of similar stature, operations, size, and scale of business.

Power or Authority over the Other

The acquired company has no say in terms of power or authority by the acquiring company.

There is harmony when it comes to merged companies.

Examples

Tata Motors acquisition of Jaguar Land Rover

Merging of Glaxo Wellcome and SmithKline Beecham to GlaxoSmithKline

Also see:

Private Public and Global Enterprises

What Is a Partnership Agreement

Challenges of Entrepreneurship

Class 11 Business Studies Chapter 2 Forms of Business Organisation

Class 11 Business Studies Chapter 8 Sources of Business Finance

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