Question

Differentiate:

Merger

Acquisition

Divestiture

Please give sample by citing local and foreign cases in details.

Answer 1

Merger leads to the combination of two or more entities to form a whole new entity which includes fresh ownership and management. It is a decision agreed upon by all the parties and is usually done to enhance operational capabilities and to reduce competition.

Smaller mobile operators T-Mobile and Sprint had been contemplating a merger to increase their stronghold in the U.S. market versus telecom giants like AT&T and Verizon.

In case of an acquisition a powerful organisation purchases another organisation wholly or partially and the company acquired becomes the subsidiary of the acquiring company. The existence of the companies remain unlike merger. Often companies acquire brands of an other company to drive the operative efficiencies.

Bristol-Myers Squibb entered into an agreement to acquire Celgene towards higher medical innovations and enhancement of product pipelines and franchises for the treatment of various diseases.

Divestiture leads to the sale of a subsidiary or a part of the business when that part is not being profitable enough for the controlling company or when the company decides to let go a division as it no longer seem to identify with the division.

Intel divested a significant portion of its smartphone modem business as it was unable to compete with Qualcomm in that segment.