Merger VS Acquisition.
The terms acquisition and merger has been widely used lately, however, it is really important to know the difference of the two, so when you talk about acquisition, then it means that you are acquiring something, however, when you talk about merger, then you are merging two organizations into one. Merger and acquisition is also referred to as M&A. The concept behind this combining is a fact that the value of shareholder is above than that of the sum of two companies alone. Both the terms are used alternatively, but they have a slight difference in their meaning.
The meaning of the terms acquisition is that, having the chance to buy one organization using the other. It can be a friendly takeover or hostile takeover. 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. Usually larger company takes over the smaller company. It has been known that the larger companies overtake the smaller ones, however, it is not the process all the time since there are times where the smaller ones are overtake those big companies. You can call an acquisition as a reverse merger if the smaller companies overtake those bigger ones.
However, there are also times where the two organizations would agree on a decision of becoming one, and it is called as a mutual decision between the two organizations. 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. As a result the newly merged firm’s stocks are issued and stocks of old companies (the stocks of two companies before merging) are surrendered. The merger can be horizontal merger, conglomerate (or congeneric) merger or vertical merger; it depends on the merging companies nature. It can only be referred to as a horizontal merger if the two companies have competed in the same product line. However, the vertical merger means that the two companies of different product line have already dealt with each other that their products could enhance the value of a company, thus, resulting to a merger. At last, the companies that do not have similar product lines at all decided to merge; this type of merger is called conglomeration merger. It can also be called as a consolidation or a purchase merger.