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. However, despite the difference of the two terms, the two terms are sometimes combined and 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. Even if for a fact that the terms merger and acquisition are used alternatively, the two terms are still different from each other in terms of their meaning.
An acquisition means that, it is buying one organization by another. It can be a friendly takeover or hostile takeover. In friendly acquisition, companies executives negotiate whereas in hostile acquisition, if the bidder continue to seek it even if the company (or target) is unwilling to agree. Due to the size of companies, it has been known that the larger companies take over those smaller companies. 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. It is also a good thing that there are mergers since the two organizations have agreed that they will work as one and they will not split their organization in terms of responsibilities. Due to the result of the merger or the merge between two companies, their stocks before they get the chance to merge with each other are being surrendered and the stocks of the newly merged firm are now being issued. 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. If the two companies which have decided on merging compete in same product line it is said to be horizontal merging. 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. At last, the companies that do not have similar product lines at all decided to merge; this type of merger is called conglomeration merger. It can also be called as a consolidation or a purchase merger.