Mergers combine two entities of similar size into one new entity, while acquisitions involve a larger entity buying a smaller one, either fully or partially.
Bank of Baroda merged with Vijaya Bank and Dena Bank, and Disney with Pixar. An acquisition example is Walmart buying a 77% stake in Flipkart for $16 billion.
The four types of mergers and acquisitions, which are Horizontal, Vertical, Conglomerate, and Congeneric, each have distinct characteristics.
Mergers and acquisitions can be structured in three ways: Asset Acquisition (buying assets), Stock Purchase (buying stock), and Merger (combining entities).
In a merger, similar-sized companies form a new entity. In an acquisition, a larger company takes over a smaller one, which operates under the larger’s name.
In a merger, shareholders of both companies get shares in the new entity. In an acquisition, the larger company buys the smaller company’s shares, which then stops trading.