The term merger and acquisition has been rampant lately, however, little did people know about their differences, for instance, the term merger means that, it is merging two organizations into one, while the term acquisition means acquiring which is to takeover something. Merger and acquisition is also referred to as M&A. 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.
An acquisition is buying one organization by another. It can be a friendly takeover or hostile takeover. 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. Usually larger company takes over the smaller company. It has been known that the larger companies overtake the smaller ones, however, it is not the process all the time since there are times where the smaller ones are overtake those big companies. This type of acquisition is called reverse merger.
Mutual decision can also happen between two organizations and it is also referred as a merger since the two organizations agreed on a decision of being one. 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. There are different types of merger that can be a result, it actually depends on the nature of the company, the type of merger includes horizontal merger, conglomerate merger and the vertical merger. It can only be referred to as a horizontal merger if the two companies have competed in the same product line. However, the vertical merger means that the two companies of different product line have already dealt with each other that their products could enhance the value of a company, thus, resulting to a 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.