People sometimes refer to mergers and acquisitions as if they are two sides of the same coin. And they can indeed be similar, but these are not just interchangeable terms. They have very different meanings and can have a different impact on a company’s future.
For those who are going through this process, it’s important to understand exactly what legal steps to take. This starts with understanding the difference between these two operations and the goals that they seek to accomplish.
An outright purchase
An acquisition is often known as an outright purchase of the other business. This sometimes happens when a large company wants to buy a smaller company that they have identified as the competition. They may buy all of the intellectual property and the assets. The former owner of that company may walk away from the business entirely, although employees may stay and be part of the transaction. But the smaller company essentially ceases to exist as it is absorbed by the bigger one.
A combination
A merger, on the other hand, is when two companies are combined. This creates a brand new legal entity. They may have a new corporate name or use the name that one of the companies was using previously. But the two businesses are combined, and the owner may even stay on to work under this new arrangement – similar to a business partnership. With a merger, both business owners likely feel they can benefit by working together.
While it’s true that both of these tactics can be beneficial and financially lucrative, it’s also complex. Those involved need to be sure they understand all the legal steps they should take.