Question

What is the difference between merger and acquisition? Your response should be at least 200 words in length.

Answer 1

Answer:

Difference between merger and acquisition:

-Merger occurs when two separate entities combine together to form a new joint entities whereas acquisitions refers to takeover of one entity by another entity.

-In mergers the two entities combine together and consolidate into a new entity with a new management structure and ownership .But in acquisitions,a new entity is not emerged rather the large companies takeover the smaller companies and they takeover the operational management decisions of another.

-Merger is a consolidation of two entities in a friendly manner by compromising themselves in some operational decisions but acquisitions is a takeover of one entity done in a unfriendly manner or in a opposed state

-Merger requires no cash to form a new entity but the two entities individual power is lost.But in acquisitions ,it requires large amount of cash and the buyer takes over the whole power

-Merger does not take place with two entities that has equal power as there may be conflicts with the top management in compromising to other entities decisions.But in acquisitions.the large entity can easily takeover the small entity and can gain the whole power and make operational decisions

-In mergers the two entities voluntarily make the decisions to combine and form a new entity.But in acquisitions large company takeover the small company in case of any losses to small company and it adds an advantage to the large company in terms of expansion

-Merger can take place between two or more companies but acquisitions mostly involves minimum of two entities

-The main purpose of merging the entities is to decrease competition and increase the operational efficiency.acquisitions take place for instantaneous growth

-The size of merging companies are more or less the same but in acquisitions the acquiring company will be more than the size of acquired company

-In mergers more legal formalities are involved as both entities agree to the terms and conditions before combining their operational decisions but in acquisitions the legal formalities involved is less as the large entity takeover the power

-Mergers are done voluntarily but acquisitions are done either volunatarily or involuntarily