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Mergers combine two separate businesses into a single new legal entity. True mergers are uncommon because it's rare for two equal companies to mutually benefit from combining resources and staff, including their CEOs. Unlike mergers, acquisitions do not result in the formation of a new company.
In a merger, the stockholders of the acquired corporation typically receive cash, stock of the surviving corporation or some combination of stock and cash.
A merger between companies will eliminate competition among them, thus reducing the advertising price of the products. In addition, the reduction in prices will benefit customers and eventually increase sales. Mergers may result in better planning and utilization of financial resources.
Horizontal merger is a business consolidation that occurs between firms who operate in the same space, often as competitors offering the same good or service.
Both terms often refer to the joining of two companies, but there are key differences involved in when to use them. A merger occurs when two separate entities combine forces to create a new, joint organization. Meanwhile, an acquisition refers to the takeover of one entity by another.
A merger is an agreement that unites two existing companies into one new company. There are several types of mergers and also several reasons why companies complete mergers. Mergers and acquisitions (M&A) are commonly done to expand a company's reach, expand into new segments, or gain market share.
Mergers combine two separate businesses into a single new legal entity. True mergers are uncommon because it's rare for two equal companies to mutually benefit from combining resources and staff, including their CEOs. Unlike mergers, acquisitions do not result in the formation of a new company.
Although a merger is typically thought of as an equal split in which each side maintains 50 percent of the new company, that's not always the case. In some mergers, one of the original entities gets a larger percentage of ownership of the new company.