| Merger |
Acquisition |
| A merger is a combination of two companies into one larger company. |
An acquisition is taking control of a company, leading to its takeover. It could be an acquisition of tangible assets, intangible assets, rights and other kinds of obligations. |
| All the combining companies are dissolved and only the new entity continues to operate. |
Acquisitions are often made as part of a company's growth strategy whereby it is more beneficial to take over an existing firm's operations and niche compared to expanding on its own. |
There are four types of acquisitions:
1. Friendly acquisition Both the companies approve of the acquisition under friendly terms. There is no forceful acquisition and the entire process is cordial.
2. Reverse acquisition A private company takes over a public company.
3. Back flip acquisition A very rare case of acquisition in which the purchasing company becomes a subsidiary of the purchased company.
4. Hostile acquisition Here, as the name suggests, the entire process is done by force. The smaller company is either driven to such a condition that it has no option but to say yes to the acquisition to save its skin or the bigger company just buys off all its share, thereby establishing majority and hence initiating the acquisition.
