The Difference Between Mergers and Acquisitions

difference between mergers and acquisitions m&a merger vs acquiring companies

Do you want to get into a high-powered career that's not only lucrative but also has a very exciting day-to-day? Do you love the idea of making large-scale decisions with companies that create massive economic impacts on the world? 

If so, then you're in the right place. In this article, we're going to talk about the business of mergers and acquisitions. This particular subset of business activities is always a good career choice. 

But first, it's important for you to understand the difference between mergers and acquisitions. In this article, we're going to take some time to delve into the nitty-gritty of what makes merging a company with another different from acquiring a company. 

What Are Business Mergers? 

First and foremost, the distinctive characteristic of a business merger is that two or more companies that are on relatively equal footing come together as one. A business that merges with another is typically doing so in order to gain market share and expand its presence. 

However, it will typically merge with a company that is in a similar situation as itself revenue and market-wise, such that the two businesses can leverage each other's synergies in order to reduce costs and increase revenue. 

In a business merger, a new name is given to the new entity. New stocks are typically issued. 

Last but not least, probably the most important characteristic is that mergers are friendly. They are planned. Both parties are fully bought into the merger, and both parties see it as beneficial for their success. 

Thus, if you like the idea of seeing two companies come together on agreeable terms, then specializing in mergers may make sense for you. 

What Are Business Acquisitions? 

On the other hand, business acquisitions can be very different from mergers. Firstly, with acquisitions, there is an acquiring company (typically much larger and more powerful than the company being acquired). Sometimes even larger companies need to take out business acquisition loans depending on their financial situation and the valuation of the other organization. 

One of the consequences of that is that acquisitions can be hostile. A company can forcibly take over a smaller one, provided that it has enough cash to buy out enough of the investors/owners in the company. 

The reason why companies might acquire another are varied. For one, the acquiring company may want to eliminate the threat of a competitor. Or, it may be using the company as a supplier for products, and just wants to bring them in-house to streamline the manufacturing flow. A merger and acquisition advisor will consult on the pros and cons of the acquisition. 

The end result is that one company is the parent, and the other is the subsidiary if it's not completely integrated into the parent company. The acquiring company will be the one that dictates the terms of the acquisition. 

Understand the Difference Between Mergers and Acquisitions 

There you have it M&A inquirers. Equipped with this guide to the difference between mergers and acquisitions, you should now have a far better idea of what building a career in this field will look like. 

For more business advice on buying and selling companies, check out the rest of the website! We publish a wide variety of helpful articles on mergers, acquisitions, partnerships, company sales, and exit strategies.

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