Mergers and acquisitions are often used synonymously, even though they refer to two very different transactions. The most important similarity in the meaning of the two terms is that they both refer to a transaction in which two companies join forces – according to informed small business brokers here are some aspects that set the two types of transactions apart:
- What a merger is – this type of transaction usually takes place between two companies that are similar in size and that usually operate in the same industry. The transaction involves the creation of a new business entity into which the two merging companies are dissolved in order to be able to access new markets or to increase potential. Each of the two companies brings their employees to the new entity, usually not only at the level of the management, but also at the other levels of the corporate hierarchy of the new entity;
- What an acquisition is – this term refers to the transaction in which one company takes over another one. With an acquisition, there is no new entity established, the acquired company being taken over by the acquirer, usually in exchange for a sum of money paid to the owner of the acquired business.