The Difference Between Merger & Acquisition.
The term merger and acquisition has been rampant lately, however, little did people know about their differences, for instance, the term merger means that, it is merging two organizations into one, while the term acquisition means acquiring which is to takeover something. Moreover, there are some people who would call the two terms as M&A since the two terms are usually combined into one. However, the combination of both merger and acquisition is not just a normal thing because it means that the value of a shareholder is greater than the value of the sum of two companies. Although the two terms are used alternatively, their meaning still have a difference.
The meaning of the terms acquisition is that, having the chance to buy one organization using the other. There are only two approaches in an acquisition, it can only be either a friendly approach or a harsh one. It is very important for you to know that in a hostile approach, the bidder will still continue to seek it even if the company or the target has already disagreed, while in a friendly approach of acquisition, then the executives of a company would prefer to continue the negotiation. It has also been known that those large companies take over those smaller companies due to different reasons. However in some situations a smaller company might overtake the larger one and only keeping its name for the new firm which is the result of acquisition. You can call an acquisition as a reverse merger if the smaller companies overtake those bigger ones.
A merger is said to be when two organizations agree on the decision of being one; it’s the mutual decision. It is also a good thing that there are mergers since the two organizations have agreed that they will work as one and they will not split their organization in terms of responsibilities. Due to the result of the merger or the merge between two companies, their stocks before they get the chance to merge with each other are being surrendered and the stocks of the newly merged firm are now being issued. There are different types of merger that can be a result, it actually depends on the nature of the company, the type of merger includes horizontal merger, conglomerate merger and the vertical merger. A horizontal merger means that the two companies have a competition in the same product line. However, it can be referred to as a vertical merger if the two companies in different product line have agreed on a merger wherein the products can enhance the value of the company. Last but not the least ,is the conglomeration merger, it refers to two companies who have different product lines with each other, but still agreed to merge with each other. Depending on how merger has been financed it can be categorized as purchase mergers and consolidation mergers.