What Makes a Merger Different From An Acquisition?

You usually hear these terms together as a single phrase: “mergers and acquisitions” – but that’s really quite misleading.  It’s not like “hop, skip, and jump” or “ranting and raving”’; it’s usually more like “renting and buying” – two entirely different activities that happen to be mentioned together.

Here’s what makes a merger different from an acquisition:

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A merger is what happens when two businesses agree that it’s in everyone’s best interest to proceed forward as a single unit with a single administrative section. Each company essentially gives 50% of its stock to the other company, resulting in each one co-owning the other and an agreement is written up about how the new management will be decided.  Once the new management is in place, it’s as though the companies were never separate.


Acquisitions, on the other hand, are generally one-sided. One company is usually smaller and the other, the ‘acquirer’, simply has enough funds or credit to purchase the first company outright either pre-existing in their accounts or because they’re able to acquire a business acquisition loan. The acquirer simply purchases the business in full, paying for all of its assets, assuming all its liabilities, and taking over running the business from the current owners, whom often pocket a boatload of money and walk off to either retire or start another business.

Hostile Takeovers

The last way that a business can acquire another is through a hostile takeover.  This is where one business usually purchases stock in another business – a lot of stock – and one of two things happens. In the first scenario, the acquirer gains enough stock in the target company to control its business and they either dissolve it or essentially sell it to themselves at cost.

In the second scenario, the acquirer gains enough stock to have a say in boardroom decisions and then files various petitions to get the current CEO or Chairman ousted, hoping to replace him or her with their own slate of company directors.

In general, a hostile takeover is generally considered a form of acquisition because in the end, the acquirer usually purchases some (or all) of their former competitor. The only real difference between an acquisition and a hostile takeover is the methods the acquirer has to employ to achieve their goal.

If you are considering a merger, an acquisition, or a hostile takeover, make sure you are working with a team of trusted advisors. Berkshire Business Sales and Acquisitions can assemble – or participate in – your trusted advisory team to ensure you get the desired outcome.

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