Differences between Mergers and Acquisitions

Описание: Merger versus Acquisition
An acquisition involves a purchasing party, be it an individual, trust, corporation or partnership, acquiring the controlling interest in the target corporation, such that the target corporation is effectively stripped of its pre-existing ownership and management, which is now subject to the direction and determination of the purchasing party.
A merger, meanwhile, involves the combination or integration of two or more corporations into a single corporate entity operating under a singular corporate name. Each of the merging corporations cancels their existing capital stock and their respective shareholders are issued new shares in the newly merged corporation based upon a previously agreed formula reflecting the effective contribution to the merged entity provided by each of the former corporations.
Conversely, when a corporate acquisition is undertaken, both the purchasing party and the target corporation remain distinct entities, with control of the target corporation having been assumed by the purchasing party. Control of the target corporation can be attained by acquiring ownership of its share capital, equity interests or assets. The purchasing party invariably seeks to realize commercial synergies through its acquisition so as to optimize its profit potential, while maintaining the target company’s distinct status and operations.
As for mergers, profit optimization is sought through the merged entity that takes on the assets, personnel, debt and business opportunities of each of the former corporations, yet streamlines leadership into a singular leadership team while tending to effectuate further synergies to attain part of the intended profit optimization that arises from eliminating duplicative functions and personnel, as well as realizing further commercial efficiencies by drawing upon the best components of the former corporations and applying them throughout the merged corporation.