The Difference Between Mergers and Acquisitions
Mergers and acquisitions are two very different things that are often conflated by the media. They both involve the union of two companies, but the definitions of both terms show a clear distinction. Read on to understand the difference between them.
A merger is when two companies merge and change their original names to a new one, often a combination of the original names. An example of this is Heinz and Kraft merging to form The Kraft Heinz Company. Mergers are considered to be an amicable way of doing business. The companies that merge are often of equal status, size, and industry.
An acquisition is when a company purchases, or acquires, another company. The company that is purchased is absorbed and no longer exists as its own entity. There is a relational difference between mergers and acquisitions. While mergers tend to be viewed as amicable, an acquisition can occur when a company needs help and they often lose their identifying brand.
The Benefits of Mergers and Acquisitions
Mergers and acquisitions allow businesses to reach wider markets and save money on labor and other overhead costs. It also reduces any competition created by the target company. Bigger companies will generally be the ones with the purchasing power. When they acquire the target company, they may take possession of a unique skill or product that will increase revenue.