Introduction
Merger and acquisition both are strategic decision and an aspect of corporate strategy. One plus one makes three: this equation is the special alchemy of a merger or an acquisition. The key principle behind buying a company is to create shareholder value over and above that of the sum of the two companies. Two companies together are more valuable than two separate companies - at least, that's the reasoning behind merger and acquisition.
Most histories of merger and acquisition begin in the late 19th U.S. However, mergers coincide historically with the existence of companies. In 1708, for example, the East India Company merged with an erstwhile competitor to restore its monopoly over Indian trade. In 1784, the Italian Monte dei Paschi and Monte Pio banks were united as the Monti Reuniti. In 1821, the Hudson's Bay Company merged with the rival North West Company.
Merger
The combining of two or more companies, generally by offering the stockholders of one company securities in the acquiring company in exchange for the surrender of their stock. Basically, when two companies become one. This decision is usually mutual between both firms. A merger can happen when two companies decide to combine into one entity.
According to Webster’s Business Dictionary-
“A blending of two or more companies by acquisition, in which one company purchases others and they are absorbed into the parent company, or by consolidation, in which a new corporation is formed to absorb the merging companies”.
Acquisition
An acquisition or takeover is the purchase of one business or company by another company or other business entity. Such purchase may be of 100%, or nearly 100%, of the assets or ownership equity of the acquired entity. Consolidation occurs when two companies combine together to form a new enterprise altogether, and neither of the previous companies remains independently.