The merger alludes to the combination of two or more companies, to form a new company, both in terms of merger and absorption. Acquisition or otherwise known as an acquisition a business strategy in which a company takes control of another company. By reading this article, you will be able to understand the difference between merger and acquisition.
|Sense||The merger means the merger of two or more of two companies voluntarily to form a new company.||When an entity acquires the activity of another entity, known as Acquisition.|
|Formation of a new company||s||No|
|Nature of the decision||The mutual decision of merging companies.||Friendly or hostile decision of purchasing and acquired companies.|
|Minimum number of companies involved||3||2|
|Purpose||Reduce competition and increase operational efficiency.||For instant growth|
|Business size||Generally, the size of the societies that merge is more or less the same.||The size of the buying company will be greater than the size of the acquired company.|
|Legal formalities||Of Pi||Less|
Definition of fusion
The merger refers to the mutual consolidation of two or more entities to form a new company with a new name. In a merger, several companies of similar size agree to integrate their operations into a single entity, in which there is shared ownership, control and profit. a type of fusion. For example, M Ltd. and N Ltd. have come together to form a new company P Ltd.
The reasons for the adoption of the merger by many companies are to combine the resources, strength and weakness of the merging companies, eliminating trade barriers, decreasing competition and achieving synergies. The shareholders of the old companies become shareholders of the new company. The types of fusion are as below:
Definition of acquisition
The acquisition of the business of a company by another company known as Acquisition. This can be done either with the purchase of the company's assets or with the acquisition of the property over 51% of the paid up share capital.
In the acquisition, the company that acquires another company known as a buying company while the company that is being acquired known as a Target company. The most powerful buying company in terms of size, structure and operations, which overwhelm or take over the weakest company, or the target company.
Most of the company uses the acquisition strategy to achieve immediate growth, competitiveness at short notice and expand its area of activity, market share, profitability, etc. The acquisition types are as below:
Key differences between merger and acquisition
The points presented below explain the substantial differences between merger and acquisition in detail:
- A type of business strategy in which two companies merge to form a new company known as the Fusion. A business strategy, in which a company acquires another company and gains control over it, known as Acquisition.
- In the merger, the two companies dissolve to form a new business while, in the acquisition, the two companies do not lose their existence.
- Two companies of the same nature and size opt for the merger. Unlike the acquisition, in which the largest company outperforms the smallest company.
- In a merger, the minimum number of companies involved three, but in the acquisition the minimum number of companies involved 2.
- The merger is carried out voluntarily by the companies while the acquisition is done voluntarily or involuntarily.
- In a merger, there are more legal formalities than the acquisition.
Examples of mergers and acquisitions in India
- Acquisition of Corus Group by Tata Steel in 2006.
- Acquisition of Myntra by Flipkart in 2014.
- The merger of Fortis Healthcare India and Fortis Healthcare International.
- Acquisition of Ranbaxy Laboratories by Sun Pharmaceuticals.
- Acquisition of Negma Laboratories by Wockhardt
Nowadays, only a few numbers of mergers can be seen; however, the acquisition is becoming popular due to extreme competition. The merger is a reciprocal collaboration between the two companies in becoming one while the acquisition the acquisition of the weaker company by the stronger one. But both benefit from taxation, synergy, financial benefit, increased competitiveness and much more that can be advantageous, but sometimes the negative effects can also be seen as an increase in employee turnover, which clashes in the culture of organizations and others but these are rare to happen.