Merger and acquisition are very well-known terms that are used when people are talking about companies and organizations. Merger and acquisition are both processes of corporate restructuring. Both are defined as a process of combining two or more companies together. Both look similar, but they are different terms used in different situations. Check out the differences below.
What is Merger?
“Merger” is the term used when two or more companies or organizations come together to expand their businesses. Merger deals are mostly finalized on friendly terms. Two or more companies share equal profits in the newly created company. In a merger, two equal companies or of the same size come together and are merged.
A deal in the case of merger happens when two companies of the same size combine to increase the business strength and also financial gains.
What is Acquisition?
Acquisition is the term used when one company takes over the other and rules all its businesses. Acquisition happens when the company acquiring the other company due to running in loss or wants to get out of the business and wants to get a one-time payment. The company that is acquiring has a stronghold in the market. When one company outperforms another, it usually happens during economic downturns or periods of declining profit margins.
In an acquisition, two companies of different sizes come together to control the loss and make it into a profitable firm. A deal in the case of an acquisition happens when one company is taking over the weak company or the company at a loss is forced to sell to the stronger company.
Merger vs Acquisition (Key Differences)
Following are the few differences between a merger and an acquisition.
| Merger | Acquisition |
| Two companies get merged | One company buys another |
| Two or more companies or organizations come together to expand their businesses | One company takes over the other and rules all its businesses |
| Companies share equal profits | Profit is taken by the acquiring company |
| Two equal companies or of the same size come together and are merged | Two companies of different sizes come together to control the loss and make it into a profitable firm |
| Expensive due to the high legal cost | Acquisitions are relatively cheaper |
| Shareholders can increase their net worth | Buyer can not raise enough capital |
| Difficult and takes longer time | Easier and less time consuming |