Merger vs. Acquisition — What's the Difference?
By Tayyaba Rehman & Urooj Arif — Updated on May 14, 2024
A merger involves two companies combining to form a new entity, while an acquisition is one company taking over another, often retaining its identity.
Difference Between Merger and Acquisition
Table of Contents
ADVERTISEMENT
Key Differences
In a merger, two companies of often similar size agree to go forward as a single new entity, sharing resources, staff, and goals, whereas an acquisition typically involves a larger company absorbing a smaller one, which may not retain its original structure or brand.
The goal of a merger is usually to create a more competitive, cost-efficient company, while the purpose of an acquisition is often to expand the acquiring company's footprint, market share, or resources.
Financially, mergers are executed as stock swaps or cash payments between companies of relatively equal standing, whereas acquisitions are generally characterized by the purchase of the smaller company’s stock or assets by the larger entity.
Culturally, a merger seeks to blend two corporate cultures, which can be challenging, whereas an acquisition might impose the acquiring company’s culture onto the target company, potentially leading to integration issues.
Strategically, mergers are typically seen as a collaboration for mutual benefit, focusing on synergy, while acquisitions are often driven by one company's desire to quickly gain a competitive edge or capabilities.
ADVERTISEMENT
Comparison Chart
Definition
Combination of two companies into a new entity
One company taking over another
Size of Entities
Often similar size
Usually involves a larger company and a smaller one
Ownership
Shared between the companies' shareholders
Typically solely by the acquiring company
Control
Jointly shared control
Control remains with the acquiring company
Outcome
New company formation
Target company absorbed or remains as a subsidiary
Compare with Definitions
Merger
A strategic move to pool resources and reduce competition.
The merger of two major pharmaceutical companies accelerated their research and development capabilities.
Acquisition
Aimed at obtaining assets, technology, or market access.
The acquisition gave the company immediate access to new international markets.
Merger
Often involves a stock swap or other financial integration.
Both companies issued new shares in a stock-for-stock deal during the merger.
Acquisition
The purchase of one company by another.
Disney's acquisition of Pixar enhanced its animation capabilities and content library.
Merger
Aimed at creating synergies and increasing value.
The merger was projected to result in significant cost savings through combined operations.
Acquisition
Can be friendly (agreed upon) or hostile (unsolicited offer).
The hostile acquisition bid was met with resistance from the target company's board.
Merger
A legal consolidation of two entities into one.
The merger of Sprint and T-Mobile created a stronger competitor in the telecommunications industry.
Acquisition
Can lead to significant restructuring and integration challenges.
Post-acquisition, significant restructuring was necessary to integrate the acquired company’s operations.
Merger
An agreement that unites two existing companies into a new entity.
The Daimler-Benz and Chrysler merger was intended to harness synergies across continents.
Acquisition
An asset or object bought or obtained, typically by a library or museum
The legacy will be used for new acquisitions
Merger
The act or an instance of merging
A merger of technique and creativity.
Acquisition
The learning or developing of a skill, habit, or quality
The acquisition of management skills
Merger
An absorption of one corporation by another, with the corporation being absorbed losing its separate identity and governance.
Acquisition
The act of acquiring.
Merger
(Law) An absorption of a lesser estate, contract, criminal offense, right, or liability into a succeeding larger one, resulting in the extinction of the former.
Acquisition
Something acquired or gained
Added two new acquisitions to my library.
Merger
One that merges.
Acquisition
The act or process of acquiring.
The acquisition of sports equipment can be fun in itself.
Merger
The act or process of merging two or more parts into a single unit.
Acquisition
The thing acquired or gained; a gain.
That graphite tennis racquet is quite an acquisition.
Merger
(economics) The legal union of two or more corporations into a single entity, typically assets and liabilities being assumed by the buying party.
Acquisition
(computing) The process of sampling signals that measure real world physical conditions and converting these signals into digital numeric values that can be manipulated by a computer.
Merger
(legal) An absorption of one or more estate(s) or contract(s) into one other, all being held by the same owner; of several counts of accusation into one judgement, etc.
Acquisition
The act or process of acquiring.
The acquisition or loss of a province.
Merger
(phonology) A type of sound change where two or more sounds merge into one.
Acquisition
The purchase of one commercial enterprise by another, whether for cash, or in a trade of stock of the purchasing company for that of the purchased company.
Merger
One who, or that which, merges.
Acquisition
The thing acquired or gained; an acquirement; a gain; as, learning is an acquisition.
Merger
An absorption of one estate, or one contract, in another, or of a minor offense in a greater.
Acquisition
The act of contracting or assuming or acquiring possession of something;
The acquisition of wealth
The acquisition of one company by another
Merger
The combining of two groups into a unified single group under a single leadership, with voluntary participation by the leaders or management of both groups.
Acquisition
Something acquired;
A recent acquisition by the museum
Merger
The combining of two commercial enterprises into a unified single enterprise under a single management, with voluntary participation by both parties; as, the merger of Daimler-Benz and Chrysler into Daimler-Chrysler created a powerful competitor in the automobile manufacturing industry. Compare acquisition and takeover.
Acquisition
The cognitive process of acquiring skill or knowledge;
The child's acquisition of language
Merger
The combination of two or more commercial companies
Acquisition
An ability that has been acquired by training
Merger
An occurrence that involves the production of a union
Acquisition
Involves the acquiring company taking over control.
After the acquisition, the smaller company became a wholly-owned subsidiary.
Common Curiosities
What are the common reasons companies decide to merge?
Companies merge to enhance competitive positioning, expand market reach, achieve economies of scale, and increase shareholder value.
How do shareholders benefit from mergers and acquisitions?
Shareholders can benefit from potential stock price increases, enhanced market position of the combined entities, and improved profitability.
What is the primary difference between a merger and an acquisition?
The primary difference is that a merger combines two companies into a new entity, while an acquisition involves one company absorbing another.
What is a "merger of equals"?
A merger of equals occurs when two companies of similar size and value combine to form a new company.
What are the risks associated with acquisitions?
Risks include integration issues, culture clashes, and overvaluation of the acquired company.
Can a merger be hostile?
Mergers are generally mutual agreements and not hostile, unlike some acquisitions.
How does the regulatory environment affect mergers and acquisitions?
Regulatory approvals are required to ensure that the deal does not create monopolistic conditions that could harm consumers.
What is due diligence in the context of mergers and acquisitions?
Due diligence involves a thorough review of the target company's business, assets, liabilities, and financial performance before completing a merger or acquisition.
Are mergers and acquisitions always successful?
Not always; they can fail due to financial issues, poor strategic fit, or cultural mismatches.
Can employees be negatively affected by mergers and acquisitions?
Yes, mergers and acquisitions can lead to job redundancies, changes in corporate culture, and uncertainty about career paths.
Share Your Discovery
Previous Comparison
Thrombosis vs. Embolism
Next Comparison
Modacrylic vs. PolyesterAuthor Spotlight
Written by
Tayyaba RehmanTayyaba Rehman is a distinguished writer, currently serving as a primary contributor to askdifference.com. As a researcher in semantics and etymology, Tayyaba's passion for the complexity of languages and their distinctions has found a perfect home on the platform. Tayyaba delves into the intricacies of language, distinguishing between commonly confused words and phrases, thereby providing clarity for readers worldwide.
Co-written by
Urooj ArifUrooj is a skilled content writer at Ask Difference, known for her exceptional ability to simplify complex topics into engaging and informative content. With a passion for research and a flair for clear, concise writing, she consistently delivers articles that resonate with our diverse audience.
