Difference Between Merge and Acquisition
Some of us have been working in the financial and banking sector. The ones who do not are always fascinated by this industry. There are so many upheavals that we are so awed. This is also because the people in this sector have to work with flawlessly and accuracy are the hallmarks for them. They cannot go wrong in anything. There is also too much consolidation at times.
The entities that cannot sustain the pressure are gobbled up by others. Some entities merge with others or get acquired. Now, most of us are not aware of what is the difference between merger and acquisition. Very often could be mix-up due to the wrong reference of what we really meant. Those in the finance sector or the media might be aware of the subtle variance in what they mean. That does not mean we as laymen can get away by referring to them in a wrong manner.
However, these days there is a sudden spurt in these activities due to reorientation of important strategy across all businesses. We felt we should enlighten our readers about the difference between merge and acquisition in the article.
Definition of Merger
Merger is said to happen in a situation when two or more entities take a business decision to combine their entities into a new entity. Earlier, they may not be having all the unique proposition vis-à-vis the competition. Once the merge has taken place, the new entity can utilise the benefits provided by the merging entities. The new entity will have a new decision-making structure wherein the earlier individual entities would cease to exist.
It is generally done to have an advantage against the other businesses. What happens is the new entity becomes the owner of the resources and the products of all the entities which had merged. This is one of the difference between merger and acquisition. The people holding shares of the earlier entities will now hold the shares in the new entity. The setup has to be discussed and finalised mutually amongst the parties.
Definition of Acquisition
Acquisition is said to take place when one entity – the acquirer takes over another– the acquiree. Here, one of the entities will cease to be and all its properties and assets – both movable and immovable, will be owned by the other entity. We always think the entity which is taken over is always the smaller among the two.
However, it may not always be the case. Sometimes, a smaller one may acquire the big fish. It may happen through an open offer to which the directors of the big fish may agree. So, we can now say the difference between a merger and an acquisition is that for a merging to happen, the entities will join to form a new entity and the rights and privileges are transferred to the new entity.
an acquiring is done, the decision making will be done by the acquirer, while
the acquire loses all the rights and privileges that it was used to having
earlier. In this case, one of the companies takes over the majority share or
the whole of the other company.
Merger vs Acquisition Comparison Table
We will now take our readers through the difference between merge and acquisition in a tabular form.
|Basis of Comparison||Merger||Acquisition|
|What it means||Two or more entities may join together to form a new entity||A company may be bought over by another|
|What is the need||To have a symbiotic relationship and use the strengths of each other||For instant growth by taking over the resources of another company|
|Decision making||There will be new supervision with people from both the entities||Usually rests with the acquiring entity|
|New company formation||Yes||No|
Conclusion of Main Difference Between Merge vs Acquisition
We had been talking about difference between merger and acquisition. The former is about synergistic relationships while the latter is of one entity taking over the ownership of another. While merging, a new entity is formed, and the decision-making power usually rests with supervising from both the companies. Of late, due to the negativity associated, acquiring is given to look like a merger.