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What is the Meaning of Mergers and Acquisitions?
Mergers and acquisitions (M&A) make part of the planning of any company, which is also related to the finance of any corporation because it has to do with acquiring, selling, splitting and mixing different companies or similar businesses that can assist a company to quickly increase its size in its market or location, be it old or new, not needing to set up a partner or subsidiary company or joint venture.
They can also be seen as a kind of company reorganization in order to bring advantages to the company. The overtaking of an industry happens when many mergers occur making several small entities become a big, powerful one, like what happened with the automaker industry in between the years 1910 and 1940.
There is a difference between merger and acquisition, but it is more and more hard to see it with the passing of time, especially because they bring similar value to the company, but that doesn’t mean this difference has completely disappeared. If we see it from a legal perspective, a merger is the making of a new company by mixing two different companies into one, and an acquisition is when a company purchases another and becomes its parent. In that case the acquired company still exists as an independent legal entity but it’s controlled by its parent company. Both ways can give the same result of an economic merge between the two companies. In reality an exchange that counts as an acquisition is able to be named a “merger of equals” is the chief executives of both entities are in agreement that the merge is for the benefits of the participating entities. When the deal is “forced” though, it is simply called an acquisition.
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