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Differences between mergers and acquisitions

On Behalf of | Oct 6, 2022 | Business Law

Growing a business sometimes requires more than just seeking out more customers to increase revenue. It’s sometimes necessary to join two companies together. This is done through mergers and acquisitions. 

While some people use those terms interchangeably, they are different concepts. Mergers and acquisitions are often a scary time for employees, but they’re a crucial part of doing business. Some companies, including public companies, need to have approval from the appropriate government agencies to complete a merger or acquisition. Understanding them can help you to ensure that you’re considering the solution your business needs. 

What is a merger?

In a merger, two companies combine with each other. They form a new company that includes key people from each of the original companies. This is often done to increase revenue and decrease overhead. Mergers also allow the new company to expand into new markets, which can help it to grow faster than it would have otherwise. 

What is an acquisition?

An acquisition means that one company absorbs another company. The smaller company is dissolved and becomes part of the bigger company. The assets of the smaller company become the property of the larger one. The fate of employees of the company that was acquired varies, but it’s ultimately up to the larger company to determine who stays and who goes. 

Regardless of which of these situations your business is in, you must ensure that you have the documentation and contracts that protect the interests of you and the company. Because these matters are often complex, you should work with someone familiar with these situations so you know you’re taking care of everything appropriately.