Merger and acquisition are the two most commonly applied corporate

restructuring strategies, which are often uttered in the same breath, but they are
not one and the same. These are the form of external reconstruction, whereby
through corporate combinations, business entities purchases a running business
and grows overnight. It helps the business in maximizing the profit and growth
by increasing the level of production and marketing operation. While merger
means “to combine”, Acquisition means “to acquire.”

Merger alludes to the combination of two or more firms, to form a new company,
either by way of amalgamation or absorption. Acquisition or otherwise known as
takeover is a business strategy in which one company takes the control of another
company.

CONCEPT OF BUSINESS ACQUISATION

Business acquisition is the process of acquiring a company to build on strength

and weaknesses of the acquiring company.

It is a corporate action in which a company buys most, if not all, of another

company ownership stakes in order to assume control. Acquisitions are often
made as a part of company’s growth strategy whereby it is more beneficial to take
over existing firms operations and niche compared to expanding on its own.

Definition of Acquisition

The purchase of the business of an enterprise by another enterprise is known as

Acquisition. This can be done either by the purchase of the assets of the company
or by the acquiring ownership over 51% of its paid-up share capital.

In acquisition, the firm which acquires another firm is known as Acquiring

company while the company which is being acquired is known as Target
company. The acquiring company is more powerful in terms of size, structure,
and operations, which overpower or takes over the weaker company i.e. the target
company.

Most of the firm uses the acquisition strategy for gaining instant growth,
competitiveness in a short notice and expanding their area of operation, market
share, profitability, etc. The types of Acquisition are as under:
  Hostile
 Friendly
 Buyout

CONCEPT OF MERGER

DEFINATION- A merger means absorption of one company by another company,

wherein one of the two existing companies loses its legal identity after
transferring all its assets, Liabilities and other properties to the other company.

Merger refers to the mutual consolidation of two or more entities to form a new
enterprise with a new name. In a merger, multiple companies of similar size
agree to integrate their operations into a single entity, in which there is shared
ownership, control, and profit. It is a type of amalgamation. For example M Ltd.
and N Ltd. Joined together to form a new company P Ltd.

The reasons for adopting the merger by many companies is that to unite the
resources, strength & weakness of the merging companies along with removing
trade barriers, lessening competition and to gain synergy. The shareholders of the
old companies become shareholders of the new company. The types of Merger
are as under:

 Horizontal
 Vertical
 Congeneric
 Reverse
 Conglomerate

A merger can be horizontal, vertical, or conglomerate. A horizontal merger

is entered into for the purpose of reducing or eliminating one or several
competing companies in the market. A vertical merger is where one
company provides raw materials or services to the business or businesses it
is acquiring. As a result, marketing efforts are concentrated and there is an
uninterrupted supply of goods and services. A conglomerate merger is
entered into with the goal of diversifying business activities.
 CONCEPT OF AMALGAMATION

An amalgamation can be in the nature of purchase or merger.

Amalgamation in the nature of purchase is when one company
acquires another where the transferor’s business is discontinued. This
means the shareholders of the transferor entity no longer have a
proportionate share in the combined equity of the parties to the
amalgamation. Amalgamation in the nature of merger, on the other
hand, combines the assets and liabilities, including the interest of the
shareholders as well as the business of the parties to the amalgamation.

In an amalgamation, the company that acquires another retains its identity while
the identity of the acquired company is dissolved.

Owners of shares of Merger and Amalgamation

The shareholders of the companies who are parties to the merger

become the shareholders of the new entity. On the other hand, the
shareholders of the acquired company is added to the existing number
of shareholders of the acquiring company in an amalgamation.
 BASIS FOR
MERGER ACQUISITION
COMPARISON

Meaning The merger means the When one entity purchases

fusion of two or more than the business of another
two companies voluntarily entity, it is known as
to form a new company. Acquisition.

Formation of a new Yes No

company

Nature of Decision The mutual decision of the Friendly or hostile decision

companies going through of acquiring and acquired
mergers. companies.

Minimum number of 3 2
companies involved

Purpose To decrease competition For Instantaneous growth

and increase operational
efficiency.

Size of Business Generally, the size of The size of the acquiring

merging companies is company will be more than
more or less same. the size of acquired
company.

Legal Formalities More Less

COMPARISION BETWEEN MERGER AND AMALGAMATION

BASIS MERGER AMALGAMATION

CREATION Two or more companies who share A bigger and financially

similar operations or are engaged in the stronger entity takes
same line of business combine to expand over a smaller one
their services or diversify their activities.

TYPES Horizontal, vertical, and Amalgamation in the

conglomeration nature of purchase
and amalgamation in
the nature of merger

the shareholders of the companies who shareholders of the

OWNER OF are parties to the merger become the acquired company is
SHARES shareholders of the new entity added to the existing
number of shareholders
of the acquiring
company