Mergers and Acquisitions is that area of management and finance that deals with joining with or/and purchasing other companies. A merger refers to the joining of two companies in order to become a new business, generally under a new business name.
On the other hand, an acquisition refers to buying of a smaller company by a bigger one. The bigger company is generally known as the parent company while the smaller one is known as the subsidiary.
Impact of Mergers and Acquisitions
Both these acts lead to changes in control of the companies. These involve combining of the operations and management of two or more entities into a single one.
Merger - In case of a merger, the merging companies decide to put together their operations to formulate a single entity.
Acquisition - While in the case of an acquisition, the parent company has full rights to merge the operations, to sell off the operations or to cancel the products and services altogether.
An important note!
Mergers and Acquisitions are not as simple as their definitions are. It is very important to be well informed about every single aspect of the company you wish to merge with or to acquire.
The lack of foresight and the inability to overcome the challenges can prove to be an expensive and a big mistake for the companies involved.
Merger and acquisition might sound synonomous but they are not. Merger is when two companies get together to functon as one. This might be a joint decision by both the company. But an acquisition is usually not. It is when a big company buys another company due to various factors ranging from insolvency to union crisis.
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