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What is the difference between a merger and an acquisition?

On Behalf of | Mar 17, 2015 | Mergers & Acquisitions

Business owners in Florida have many challenges to face depending upon fluctuating circumstances and market conditions. No matter the size of the business concerns about the health of a business and its future always weighs heavily on its owners and executives. In some cases, the best way to secure a good financial future for a business is to engage in a private merger with another company, even if a competitor.

Investopedia indicates that while mergers and acquisitions are frequently referred to as one, they are actually two different processes. They both relate to two separate companies becoming one but the manner in which that happens is different in each case. A merger happens when both parties mutually agree to come together for some clearly identified financial gain. In some cases, this can be to weather an economic or financial storm or to better position the newly formed company in the competitive landscape. When companies merge, completely new stocks are formed and issued.

An acquisition involves one company literally taking over another. This can be done by a large company purchasing a smaller one. Some acquisitions can involve companies of relatively equal size but be done at the dismay of one company, often called a hostile acquisition. In an acquisition, the acquired company essentially ceases to exist and becomes folded into the acquiring company.

Businesses choose mergers or acquisitions based upon corporate strategy that allows them to reduce labor costs, increase market share or realize other important business goals. This information is not intended to provide legal advice but general information about mergers and acquisitions in Florida.