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. Moreover, there are some people who would call the two terms as M&A since the two terms are usually combined into one. It has been known that the combination of merger and acquisition or also known as M&A means that the value of shareholder is much greater than the value of the two companies when their sum is combined. 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. The approach of an acquisition can either be friendly or harsh. There are also times in a friendly acquisition where the executives of a company would just prefer to negotiate, however, if they are in a hostile approach, the bidder will still insist to seek it even if the company is already willing to disagree. 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. This type of acquisition is called reverse merger.
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. In a merger, organizations agree to be as one organization and continue as one rather than as two separate organizations. 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. Nevertheless, a merger can either be a conglomerate merger, a horizontal merger or a vertical merger, it only depends on the nature of the company if what type of merger suits it. A horizontal merger means that the two companies have a competition in the same product line. If two companies of different product line agreed on a merger such that there products together enhances the company’s value is said to be vertical merger. 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.