Merger vs. Acquisition: What’s the Difference?
The main difference between merger and acquisition is that a merger occurs when two companies combine to form a new entity, while an acquisition occurs when one company buys another company and absorbs it into its own business.
Before we move to more differences, let’s first understand Merger and Acquisition:
- Merger: Merger is a corporate strategy where two or more companies combine to form a new entity.
- Acquisition: Acquisition is a corporate strategy where one company acquires another company.
Now, let’s get to Merger vs Acquisition:
Major differences between Merger and Acquisition
| Merger | Acquisition |
|---|---|
| In a merger, the two companies involved usually have equal control over the new entity. | In an acquisition, the acquiring company gains control of the acquired company. |
| In a merger, the two companies involved are usually of similar size. | In an acquisition, the acquiring company is usually larger than the acquired company. |
| The purpose of a merger is to achieve synergies by combining resources and operations of the two companies. | The purpose of an acquisition is to gain control of another company’s assets, resources, and operations. |
| Mergers usually involve a more complex legal structure than acquisitions, as a new entity needs to be formed. | Acquisitions may involve a simpler legal structure, as the acquiring company may simply purchase the shares of the acquired company. |
| Mergers require a greater focus on cultural integration, as the two companies may have different organizational cultures. | Acquisitions may require less cultural integration as the acquiring company already has an established culture. |
So, these are the main differences between the entities.
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