What is the difference between merger and acquisitions

The reasons to join forces can vary and often relate to the want to expand product offerings, increase market share and reduce costs. From a legal perspective, a merger is where two, or more, companies come together and consolidate into a new enterprise.

The decision to merge is a mutual one for all parties involved. The merging companies are pooling their resources and combining forces to gain certain benefits or competitive advantages. Usually in mergers, the parties have similar size and scale operations, and treat each other as equals. An example of a merger is the formation of the pharmaceuticals brand GlaxoSmithKline, where in Glaxo Wellcome and SmithKlineBeecham were merged together in order to establish the well-known company we see today.

An acquisition is where one company acquires the business of another company. This process does not result in a new company emerging, instead the acquiring company absorbs the purchased company along with its assets.

The company doing the taking over usually is stronger than the smaller and weaker company that is being purchased, and not all takeovers are done via mutual agreement. You can have hostile takeovers, where one company takes over the operations of another without its consent or a takeover that has resulted from a company being brought whilst in administration. Login details for this Free course will be emailed to you.

Forgot Password? Article by Madhuri Thakur. Leave a Reply Cancel reply Your email address will not be published. Please select the batch. Exxon Corp. Exxon and Mobil were the top two oil producers, respectively in the industry prior to the merger.

The merger resulted in a major restructuring of the combined entity, which included selling more than 2, gas stations across the United States. T completed its acquisition of Time Warner Inc.

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I Accept Show Purposes. Your Money. Personal Finance. Your Practice. Popular Courses. Part Of. Unlike acquisitions, mergers are when two or more existing companies come together to form an entirely new company.

Mergers are always friendly, planned and unanimously agreed upon by all participating parties, allowing them to work together as one company. Once a merger is complete, a new company name is given and new stock is issued.

There are many reasons why companies would have an interest in mergers. These include:. Something many people are not aware of is that the size of the businesses merging together does not matter. Merger Structure There are several structures for mergers, depending on business needs and requirements.

Below are some of the most common. Conglomeration — This happens when two companies merge that share no common business areas. A good example of this is when PayPal and eBay merged together. Congeneric Merger — This occurs when two businesses merge who serve the same customer base but in different ways. A good example is when Citigroup merged with Travelers Insurance.

Horizontal Merger — These occur when two companies merge together who were in direct competition.