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Merger and Acquisition (M&A) are two terms that are jointly uttered,

whenever we hear them. But, Are they both one? The answer is no, Merger
means to combine while Acquisition means to acquire. In business
terminology, Merger is a type of Amalgamation where two entities combine
to form a new entity. But, if we talk about Acquisition, it is similar to a
takeover, in which one company acquires another company. In this article, we
have compiled the important differences between Merger and Acquisition, in
tabular form.

Content: Merger Vs Acquisition

1. Comparison Chart

2. Definition

3. Key Differences

4. Examples for Mergers and Acquisitions

5. Conclusion

Comparison Chart

BASIS FOR COMPARISON MERGER

Meaning The merger means the fusion of two or more than two
to form a new company.

Formation of a new company Yes

Nature of Decision The mutual decision of the companies going through

Minimum number of companies 3


involved

Purpose To decrease competition and increase operational effi

Size of Business Generally, the size of merging companies is more or l

Legal Formalities More


BASIS FOR COMPARISON MERGER

Definition of Merger
Merger refers to the mutual consolidation of two or more entities to form a
new enterprise with a new name. In a merger, multiple companies of similar
size agree to integrate their operations into a single entity, in which there is
shared ownership, control, and profit. It is a type of amalgamation. For
example M Ltd. and N Ltd. jJoined together to form a new company P Ltd.

The reasons for adopting the merger by many companies is that to unite the
resources, strength & weakness of the merging companies along
with removing trade barriers, lessening competition and to gain synergy. The
shareholders of the old companies become shareholders of the new company.
The types of Merger are as under:

Horizontal

Vertical

Congeneric

Reverse

Conglomerate

Definition of Acquisition
The purchase of the business of an enterprise by another enterprise is known
as Acquisition. This can be done either by the purchase of the assets of the
company or by the acquiring ownership over 51% of its paid-up share capital.

In acquisition, the firm which acquires another firm is known as Acquiring


company while the company which is being acquired is known as Target
company. The acquiring company is more powerful in terms of size, structure,
and operations, which overpower or takes over the weaker company i.e. the
target company.

Most of the firm uses the acquisition strategy for gaining instant growth,
competitiveness in a short notice and expanding their area of operation,
market share, profitability, etc. The types of Acquisition are as under:
Hostile

Friendly

Buyout

Key Differences Between Merger and Acquisition

The points presented below explain the substantial differences between


merger and acquisition in a detailed manner:

1. A type of corporate strategy in which two companies amalgamate to


form a new company is known as Merger. A corporate strategy, in which
one company purchases another company and gain control over it, is known as
Acquisition.

2. In the merger, the two companies dissolve to form a new enterprise


whereas, in the acquisition, the two companies do not lose their existence.

3. Two companies of the same nature and size go for the merger. Unlike
acquisition, in which the larger company overpowers the smaller company.

4. In a merger, the minimum number of companies involved are three, but


in the acquisition, the minimum number of companies involved is 2.

5. The merger is done voluntarily by the companies while the acquisition is


done either voluntarily or involuntarily.

6. In a merger, there are more legal formalities as compared to the


acquisition.
Examples of Mergers and Acquisitions in India

Acquisition of Corus Group by Tata Steel in the year 2006.

Acquisition of Myntra by Flipkart in the year 2014.

The merger of Fortis Healthcare India and Fortis Healthcare


International.

Acquisition of Ranbaxy Laboratories by Sun Pharmaceuticals.

Acquisition of Negma Laboratories by Wockhardt

Conclusion
Nowadays, only a few numbers of mergers can be seen; however, acquisition is
getting popularity due to extreme competition. The merger is a mutual
collaboration between the two enterprises in becoming one while the
acquisition is the takeover of the weaker enterprise by the stronger one. But
both of them gain the advantage of Taxation, Synergy, Financial Benefit,
Increase in Competitiveness and much more which can be beneficial, however
sometimes adverse effect can also be seen like an increase in employee
turnover, clashing in the culture of organizations and others but these are rare
to happen.

Read more: http://keydifferences.com/difference-between-merger-and-


acquisition.html#ixzz4TTkl5zoN
Types of mergers
The following are the types of mergers

1. Horizontal mergers: It refers to two firms operating in same industry or


producing ideal products combining together. For e.g., in the banking industry in
India, acquisition of Times Bank by HDFC Bank, Bank of Madura by ICICI Bank,
Nedungadi Bank by Punjab National Bank etc. in consumer electronics, acquisition
of Electroluxs Indian operations by Videocon International Ltd., in BPO sector,
acquisition of Daksh by IBM, Spectramind by Wipro etc. The main objectives of
horizontal mergers are to benefit from economies of scale, reduce competition,
achieve monopoly status and control the market.
2. Vertical merger: A vertical merger can happen in two ways. One is when a firm
acquires another firm which produces raw materials used by it. For e.g., a tyre
manufacturer acquires a rubber manufacturer, a car manufacturer acquires a steel
company, a textile company acquires a cotton yarn manufacturer etc.
Another form of vertical merger happens when a firm acquires another firm which
would help it get closer to the customer. For e.g., a consumer durable manufacturer
acquiring a consumer durable dealer, an FMCG company acquiring m advertising
company or a retailing outlet etc.

3. Conglomerate merger: It refers to the combination of two firms operating in


industries unrelated to each other. In this case, the business of the target company is
entirely different from those of the acquiring company. For e.g., a watch
manufacturer acquiring a cement manufacturer, a steel manufacturer acquiring a
software company etc. The main objective of a conglomerate merger is to achieve i
big size.
4. Concentric merger: It refers to combination of two or more firms which are
related to each other in terms of customer groups, functions or technology. For eg.,
combination of a computer system manufacturer with a UPS manufacturer.
5. Forward merger: In a forward merger, the target merges into the buyer. For
e.g., when ICICI Bank acquired Bank of Madura, Bank of Madura which was the
target, merged with the acquirer, ICICI Bank.
6. Reverse merger: In this case, the buyer merges into the target and the
shareholders of the buyer get stock in the target. This is treated as a stock acquisition
by the buyer.
7. Subsidiary merger: A subsidiary merger is said to occur when the buyer sets
up an acquisition subsidiary which merges into the target.