How Do Mergers Differ From Acquisitions – 2022 Guide

Combining two or more brands together can happen during different situations and under different terms, and some of the most common practices include mergers and acquisitions. Many people believe that these processes are the same, but in this 2022 guide, you will learn that there are only a few things that are similar. If you are interested in practices like these, and if you want to know more about them, you have come to the right place. Keep on reading to find out how these two processes differ from one another, why do they happen, and who has the upper hand.

In which scenario do they happen?

Let’s delve deeper and see how do these situations happen and what is needed for one or the other to occur.

When a company feels that it needs additional support to survive on the market, or when they see the possibility for bigger profits, they can find similar brands that are equal and they can talk about merging together and create one bigger or better brand. There is usually no company that is bigger or better than the others, and this can happen between just two brands, or there can be three or more. It all depends on how many firms want to come together and how they are going to contribute to the success of the new brand that is being created.

On the other hand, when it comes to acquisitions, also known as takeovers, things don’t go as easily or as smoothly. There is always one brand that is bigger than the other, and the smaller one is being taken over by the other one. There is usually no quality and the acquired brand needs to follow the guidance of the bigger one. There is a huge division in power, but that is not always a bad thing. There can be many good things that come out of the process, and in many cases, the smaller business stays in the market and makes profits only because it is led by a bigger and better one.

What are the terms?

Source: aperianglobal.com

When any of these processes happen, one of the first things that people want to know is what are the terms and how do they differ from one another.

The merging process is usually friendly, and all of the things that happen are planned. The representatives most commonly sit together, discuss the terms, and they come to an agreement that will benefit everyone.

When a takeover happens, there is not a lot of room for agreements or discussions, and everything is led by the brand that takes over. In some cases, it is said that the terms may even be hostile or involuntary, and the smaller brand is obligated to respect everything that the other one is saying.

What is the new title?

Many people are wondering if a new name or title is going to be needed when these processes happen. More often than not, a new name is given to the brand that is created via merging, however, in some cases, brands choose to go with one of the names of the original brands. This can lead to a power shift, and because of that, a new title is most commonly acquired.

On the other hand, with the takeover, the smaller brand goes directly under the bigger ones, and they only take the name of the acquiring business. In some rare cases, this may not happen, however, it is extremely rare.

Places like the Imaa Institute can help you understand all the terms and titles better in any given situation, and it is always better to consult with a professional before you make any final steps, no matter if we are talking about a merger or takeover.

Who has the power?

Source: ceotodaymagazine.com

Now let’s see if there is any difference between division of power, and who has the upper hand when these scenarios happen.

In most cases, when a merge happens, the power is divided equally between all the companies that decided to come together, and more often than not, no one has the upper hand. Things are usually discussed together, and there is not one person or one brand who leads and the other ones follow.

On the other hand, when a takeover happens, and when we talk about acquisitions, the bigger brand that took over the smaller one always has the upper hand. Depending on the conditions, the representatives from the smaller one may get a say in a thing or two, but when it comes to important decisions, the larger firm is the one who makes the main decisions.

What about the stocks?

Finally, let’s talk about the stocks and what will happen to the new company that has appeared because of the process. When it comes to the first option, more often than not, new stocks get issued, and this leads to more potential investors and even clients. In this case, the new company is open for business and sharing stocks, and its main goal is to grow, no matter where the funds come from.

On the other hand, when it comes to acquisitions, more often than not, new stocks do not get issues, and other investors don’t usually have an option to invest in the brand. In some cases, during the takeover there can appear stocks for the original company or even the new branch that has been created, but this is a rare case.

Source: wealthandfinance-news.com

As you can see, there are many differences between these two processes, and the main one is that the merger happens when several companies come together to create a new firm, whereas the second option or the takeover is far more hostile and the small brand does not have much say to everything that is going to happen. Nevertheless, things are not as black or white as just this, and there have been many cases where the smaller company has been saved because of the takeover. If you want to get more information about both of these processes, it is always better to talk to an expert who can give you the exact info that you want to learn.