Matter & Substance
  January 31, 2024

Merger vs Acquisition: What’s the Difference?

Mergers and acquisitions are pivotal events in the business world, shaping the landscape of industries and companies. Understanding the nuances between these terms is crucial for anyone involved in strategic business decisions.

What Are Mergers and Acquisitions?

Mergers and acquisitions are business transactions in which the ownership of a company or companies is either transferred to or consolidated with another company or business organization. The term "mergers and acquisitions" (M&A) is often used as a collective phrase encapsulating two distinct activities. Both mergers and acquisitions involve the consolidation of companies, but the manner in which this consolidation occurs sets them apart.

What Is the Difference Between a Merger and Acquisition?

The primary difference lies in the approach to consolidation. In a merger, two companies come together to form a new entity. It's a collaborative effort where both organizations pool their resources, talents, and operations to create something new. On the other hand, an acquisition involves one company taking over another. It's a more unilateral action where the acquiring company absorbs the acquired company, which may retain its identity or be integrated into the acquiring entity.

What Is a Merger?

A merger is a strategic decision where two or more businesses to consolidate their operations and assets to create a single, new entity. The aim is to enhance overall performance and competitiveness. Mergers can take various forms, such as horizontal mergers, where companies in the same industry combine forces, or vertical mergers, which involve companies in different stages of the supply chain.

What Is an Acquisition?

An acquisition, on the other hand, is a transaction where one company acquires another, leading to the absorbed entity becoming a part of the acquiring company. The acquiring company gains control over the acquired company's assets, operations, and management. Acquisitions can be friendly or hostile, depending on the willingness of the target company to be acquired.

Examples of Mergers and Acquisitions

  • Merger: Glaxo Wellcome and SmithKline Beecham

    In the pharmaceutical industry, the merger between Glaxo Wellcome and SmithKline Beecham in 2000 resulted in the formation of GlaxoSmithKline (GSK). This strategic move aimed to combine the research and development capabilities of both companies, creating a pharmaceutical powerhouse with a broader product portfolio and increased market presence.

  • Merger: Exxon and Mobil

    The merger between Exxon and Mobil in 1999 marked a significant development in the oil and gas sector. The two energy giants joined forces to streamline operations, reduce costs, and enhance their competitive position. The merger led to the creation of ExxonMobil, one of the largest publicly traded companies globally.

  • Merger: AOL and Time Warner

    In the technology sector, the merger of AOL and Time Warner in 2000 aimed to capitalize on the synergy between content creation and distribution. However, this high-profile merger faced challenges, and eventually, the companies demerged in 2009. This example illustrates that not all mergers result in long-term success.

  • Acquisition: Facebook Buys Whatsapp

    The acquisition of WhatsApp by Facebook in 2014 showcased the trend of tech giants acquiring innovative startups to expand their reach. Facebook, recognizing the growing importance of mobile messaging, acquired WhatsApp for its user base and advanced messaging platform, strengthening its position in the social media landscape.

  • Acquisition: Amazon Buys Whole Foods

    In the consumer goods industry, the acquisition of Whole Foods Market by Amazon in 2017 was a strategic move to enter the grocery market. Amazon aimed to leverage Whole Foods' established brand and physical stores to enhance its grocery delivery services, demonstrating how acquisitions can open new business avenues.

  • Acquisition: Microsoft Buys LinkedIn

    The acquisition of LinkedIn by Microsoft in 2016 exemplifies a technology giant diversifying its services. Microsoft acquired the professional networking platform to integrate its features into Microsoft's suite of productivity tools, offering users a seamless experience across professional and business applications.

Contact Mowery & Schoenfeld for Expert Help with Mergers and Acquisitions

Whether you're contemplating a merger to enhance collaboration or considering an acquisition to expand your market presence, Mowery & Schoenfeld provides comprehensive support. From financial due diligence to strategic planning, our services cover the spectrum of M&A activities.

Take the next step towards strategic growth and business transformation. Contact Mowery & Schoenfeld today to make informed decisions, mitigate risks, and unlock the full potential of your business with the support of our seasoned professionals.