Acquisition
An acquisition is when one company purchases most or all of another company’s shares to gain control of that company and become the new owner.
It will require to acquire more than 50% shares of the other company to call it as an acquisition and have control over the decision making.
Acquisition occurs often by the company with similar type of business to have more market share by acquiring direct competitor or to improve its own operation.
Sometimes company acquires in an unrelated field for just diversification.
Acquisition is quicker to execute because it’s just acquisition of shares of another company.
Acquisition will give company power over decision making, operations, working methods, organization structures etc.
Advantages:
– It is a quick way to grow
– There can be synergistic gains
– Acquire the necessary strategic capabilities
– Overcomes barriers to entry
– Can choose a target that fits best
– Enhances reputation with finance providers
Disadvantages:
– Can be very expensive
– Synergies are not automatic
– Can lead to cultural clashes
– There may be legal barriers to overcome (e.g. competition law)
– All parts of the target are acquired (including its problems)
– Requires good change management skills
Merger:
A merger is an agreement that unites two existing companies into one new company.
A merger is the voluntary fusion of two companies on broadly equal terms into one new legal entity.
Mergers are most commonly done to gain market share, reduce costs of operations, expand to new territories, unite common products, grow revenues, and increase profits—all of which should benefit the firms’ shareholders. After a merger, shares of the new company are distributed to existing shareholders of both original businesses.
Merger is Company A + Company B = Company AB.
Vodafone + Idea = Vi
After merger old companies will not have any existence, only new company AB will have existence.