Back to Basics: The Difference Between a Merger and an Acquisition
Whether you are a seasoned business professional or a brand-new business owner, understanding the difference between mergers and acquisitions matters. These terms are often used but can sometimes blur together. Whether you’re an employee, investor, or just curious, knowing the difference helps you understand what happens when companies combine.
What is a Merger?
A merger occurs when two companies of similar size and importance join to create a single, unified company. Think of it as a partnership where both sides come together as equals. When businesses merge, this often results in a new company name, logo, or brand identity. Mergers usually happen to increase efficiency, reduce costs, and expand market presence. Both companies agree to share resources, profits, and responsibilities to promote success. However, combining two companies doesn’t always go smoothly. Differences in culture, leadership, or operations can create hurdles.
What is an Acquisition?
An acquisition occurs when one company buys another and takes control of it. In this situation, the acquiring company controls the other business. This company typically keeps its name and brand, whereas the smaller or purchased company may continue using it or be absorbed into the more prominent brand. Larger companies often use acquisitions to grow their market share quickly, enter new industries, or acquire specific expertise. Some challenges from acquisitions include layoffs, cultural clashes, or resistance from employees or customers.
Comparing Mergers and Acquisitions: The Key Differences
Mergers:
Both companies work as equals, sharing control.
Usually, it occurs between companies of similar size and strength, aiming to grow together.
A new company is created, often with a fresh identity.
Acquisitions:
One company is clearly in charge after the deal.
It often involves a larger company purchasing a smaller one to expand its reach or resources.
The purchased company may keep its name or be folded into the larger company.
In simple terms, mergers are about partnership, while acquisitions are about ownership. Understanding these terms is critical when investing in a company or considering growing your business. At their core, M&A are just different ways businesses grow, change, and adapt to the future. If you’d like more guidance on either mergers or acquisitions, HartmannRhodes is here to help you every step of the way.
Mark Hartmann is a three-time Inc 500|5000 CEO with a rich sales, operations, and leadership background in the insurance, financial services, and healthcare sectors. With extensive experience growing and selling his own businesses, Mark leverages his expertise to help owners grow and sell businesses valued at $1M —$25M. He’s earned a Master of Business Administration from Eastern University, a master of science degree in organizational change management from St. Elizabeth University, and a graduate certificate in executive coaching from Columbia University. Mark’s professional certifications include Certified Mergers and Acquisitions Professional (CM&AP), Certified Business Intermediary (CBI), Certified Exit Planning Advisor (CEPA), and Certified Value Builder (CVB).