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What’s the difference between a merger and an acquisition?

On Behalf of | Mar 2, 2023 | BUSINESS & COMMERCIAL LAW - Mergers & Acquisitions

Keeping up with competitors can be a challenge in the business world. Sometimes, companies decide they need to take seemingly extreme steps to remain competitive. Mergers and acquisitions are two options that might be viable for some companies.

Many people don’t realize that there are some major differences between mergers and acquisitions. While these terms are used interchangeably by some, it’s imperative that the correct term is used in actual business transactions.

Friendly or hostile?

In the most general of terms, a merger is a friendly consolidation of two companies. The companies usually combine under a new name. The downside to this type of arrangement is that some people will likely be terminated because there’s no need to have duplicates in many positions. Some might be able to shift to a different job, but that just depends on the structure of the workforce in the company. Both companies work together to propel the new company forward.

An acquisition isn’t as friendly. These are typically considered hostile takeovers of companies, which is why some use “merger” when describing them. When an acquisition occurs, a larger company usually takes over a smaller company. All of the smaller company’s assets are absorbed by the larger one and the smaller business simply ceases to exist. The larger company has complete control over what happens.

Regardless of which side of the matter you’re on, you must ensure that you’re protecting your interests. Working with someone who’s familiar with these business transactions is important so you can learn about the decisions you have to make. They can also review contracts and other documents for you to ensure everything is covered appropriately.