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How are mergers and acquisitions different?

On Behalf of | Jun 8, 2015 | Mergers & Acquisitions

Most people in Florida have heard references to mergers and acquisitions. However, the common utilization of both terms as a combined single thing can often lead people to believe they are one in the same. That is simply not true. An article published by Investopedia notes that one reason the two are frequently discussed together is because acquisitions historically carry with them a negative connotation. Likening these actions to mergers can lessen the negative stereotype.

Both a merger and an acquisition relate to acquiring a new business in some form. These complex business transactions can be differentiated in a few ways. In a merger, two companies come together to essentially form a completely new company. Technically, the original businesses cease to exist once the newly merged company is formed. For publicly traded companies, new stocks are even issued. The management teams in a company created by a merger will feature individuals from both of the previous companies.

An acquisition involves the complete takeover of one company by another. Whether a hostile acquisition or a friendly acquisition, the acquiring company assumes all managerial and operational control. The leadership team of the acquired company may or may not be involved once the acquisition is complete.

Whether a merger or an acquisition is best for a given situation depends in part upon the business goals of both companies involved. The asset holding and real property of each company as well as market conditions will all factor into such decisions. This information is not intended to provide legal advice but general information about mergers and acquisitions in Florida.