Mergers vs Acquisitions Differences
Both Mergers vs Acquisition is corporate strategies aimed at increasing the present capabilities of a company. Sometimes both mergers vs acquisition terms are misunderstood as simply adjoining two or more companies, but both these terms are quite different.
- The merger is the process by which two or more companies take a strategic decision to come together and merge together as one company with a new name. Merger helps the company to share information, technology, resources etc. thereby increasing the overall strengths of the company. The merger also helps in reducing the weakness and gain a competitive edge in the market. Merger always happens on friendly terms as the information is already been passed to the directors, employees etc. and proper planning is done on the structuring of the new company.
- The acquisition is the process by which one company acquires another company. The financially strong company acquires more than 50% of shares to take over another company. The acquisition doesn’t always happen on friendly terms. It can be a forced move by a company to acquire another company for various reasons like gaining new markets or gaining new customers or reducing competition etc. But acquisition can also happen when one company decides to be acquired by another company without any hostility. In acquisition, the transition is not always smooth as the company that took over will impose all the decisions on staffing, structure, resources etc. and thereby creating an air of unease to the company that was acquired and to its employees.
Mergers vs Acquisitions Infographics
Here are the top 7 differences between Mergers vs Acquisitions
Mergers vs Acquisitions Key Differences
Here are the key differences between merger and acquisition –
- One of the key differences between merger and acquisition is that merger is the process where two or more companies agree to come together and form a new company. The acquisition is the process by which a financially strong company takeovers a less financially strong company by buying more than 50% of its shares.
- The merger is a strategic decision that has been done after careful discussion and planning between the companies that are going to be merged. Hence there are fewer chances of chaotic atmosphere after merging. The acquisition is also a strategic decision but in most cases, the decision is not mutual and hence there is a lot of hostility and chaos after an acquisition has been made.
- Companies that are merged usually consider each other of equal stature and hence they help each other out to create a synergy. In the case of an acquisition, the company that acquires imposes its will on the acquired company and the acquired company is stripped of its freedom and decision making and the power difference between the acquired and acquiring companies is huge.
- Since the merger requires a whole new company to be formed, it needs a lot of legal formalities and procedures to be followed. The acquisition doesn’t have many legal formalities and paperwork to be filled as compared to the merger.
Mergers vs Acquisitions Head to Head Differences
Let’s have a look at the head to head differences between Mergers vs Acquisitions
|Basis for comparison between Mergers vs Acquisitions||Merger||Acquisition|
|Definition||The merger is a process in which more than one companies come forward to work as one.||The acquisition is a process in which one company takes control of another company.|
|Terms||Considered to be friendly and planned.||Considered to be hostile and sometimes involuntary (not always)|
|Title||A new name is given.||The acquired company comes under the name of the acquiring company.|
|Scenario||Two or more companies that consider each other on equal terms usually merge.||Acquiring company is always larger than the acquired company.|
|Power||The power-difference is almost nil between two companies.||Acquiring company gets to dictate terms.|
|Stocks||Merger leads to new stocks being issued.||In acquisition, there are no new stocks issued.|
|Example||Merging of Glaxo Wellcome and SmithKline Beecham to GlaxoSmithKline||Tata Motors acquisition of Jaguar Land Rover|
Mergers vs Acquisitions – Conclusion
When we compare mergers vs acquisitions, we may come to a decision that merger is always better than acquisition. But just like how each coin has two sides, both mergers vs acquisitions have their own strengths and weaknesses.
Companies take these decisions based on the situation they are at and the resultant discussions that they have had with the other companies. So, it is wise for companies to carefully analyze the situation that they are in and take the strategic decision that better suits the scenario and demands.
This has a been a guide to the top differences between Merger and Acquisition. Here we also discuss the mergers vs acquisitions differences with infographics, Example and comparison table. You may also have a look at the following articles for gaining further knowledge –
- Mergers and Acquisitions Course
- Types of Synergies in Mergers and Acquisitions
- Best Mergers and Acquisitions Books
- Successful Mergers and Acquisitions