What is the difference between a Merger and an Acquisition? Type: Online Exams

  Merger and acquisition are business terms that represent the process of combined business operations between two or more than two companies. Both terms relate to combined operations however but terms have some different specific meanings that create the difference. For instance, a merger relates to the process of combining business operations between 2 legal entities as a joint organization or a new organization. Somehow, the process of merger represents the expansion of a company’s business operations by taking over one entity by the other one. Conclusively it can be said that merger relates to joint business while acquisition relates to the takeover of a subsidiary by the parent companies.   

2)  Chief executive officers (CEO) paly a significant role in strategic planning as they develop plans and policies for the benefit of the business. CEO also take the decision about expansion and growth of the business through the implementation of the effectively developed strategies and policies. Chief executive officers (CEO) present the idea of acquisition and merger (M&As) which can have a direct impact on the business outcomes of the company. Chief executive officers (CEO) usually consider acquisition and merger as a good idea because they perceive that it results in the decrease of competition and improvement of company's reputation in the targeted market. By acquiring an innovative company of manufacturing sector Chief executive officers (CEO) can bring efficiency and improvement in their business operations which are highly desired by the company. Thus, Chief executive officers (CEO) most of the time consider merger and acquisition as a good idea.

3)  In accordance with the research studies, the merger and acquisition trend is increasing in the world. There are some reasons for this increasing trend. Firstly, merger and acquisition can be an attractive option to cut the cost of operations. Secondly, in the low-growth economic condition of the targeted market corporate management consider merger and acquisition as an opportunity to increase market shares. Another reason behind the increasing trend of merger and acquisition is weak consumer demand. When consumer demand goes towards decrease organizations seek opportunities to merge their competitor companies to remain sustainable and leading in the low consumer demand market.     

4)  Organization go through different phases and stages as mergers and acquisition progress between two companies. Merger and acquisition have four major phases which include due diligence phase, agreement phase, integration phase, and value attainment. In the phase of due diligence, organization take the intense analysis of the selected company to find out areas of strength and weakness. While in the second phase, management of the parent company contract agreement with the targeted company regarding acquisition and merger. However, in the third phase of the integration phase, management focus on the integration process. Here management of the parent company develop schedules and evaluate improvements. In value attainment phase of merger and acquisition, organization access total value attained by the targeted company.         

5)      Many companies fail in the merger and acquisition process. There can be several reasons for this failure. Sometimes companies fail in merger and acquisition because both companies do not clearly gel with each other. For instance, the merger of AOL and Time Warner (companies from media industry) caused a loss of 99 billion dollars right after the merger. Somehow, another possible reason behind the failure of merger and acquisition is the difference in the workplace culture of both companies. For example, in the case of Sprint and Nextel companies recorded loss of 35 billion dollars (in 2005) because of the merger as both companies were unable to make adjustment appropriately with each other because of cultural differences. Although, acquisition of Countrywide by Bank of America was failed because of unethical practices of Countrywide.