Can some body please highlight the difference between Merger & Acquisition? Are these terms used interchangebly or there is any strict distinction between these two?
There is a specific distinction: Merger: When an entire company is purchased by another. Only one company remains after the merger. Acquisition: When a part of a company is purchased by another, 2 companies can still remain in existence
The curriculum says “In a subsidiary merger, the company being purchased becomes a subsidiary of the purchaser, which is often done in cases where the company being purchased has a strong brand or good image among consumers that the acquiring company wants to retain” This is making me confused as the other company is still existing though as subsidiary. Moreover is willingness of the management has to do anything with classifying as merger or acquisition? Curriculum also says “An acquisition might refer to the purchase of assets from another company, the purchase of a definable segment of another entity, such as subsidiary, or the purchase of an entire company, in which case the acquisition would be known as a merger.” I think Merger is a special kind of acquisition where the whole company is purchased and the entity may or may not exist.
The target company ceases to exist in an acquisition while in a merger generally a new company is formed.
I need to do some numericals on M&A can you suggest some book to learn the Quant part of Merger and acq?
Merger - 1 company remains
Acquisition - 2 companies remain
Merger and Acquisition are two terms which can be together uttered, each time we hear them. But, Are they both one? The answer is no, Merger means “to combine” even as Acquisition means “to acquire”. In business terminology, Merger is a kind of Amalgamation where two entities combine to form a new entity. But, if we communicate about Acquisition, it is similar to a takeover, in which one corporation is acquired by another corporation. You can also read more important points here.
did you pass level 2?
For practical purposes I would say there is not a difference, because deals can be structured in almost any way, and that structure doesn’t always reflect the underlying economics of what’s going on (example: in an inversion the “buyer” is often smaller, gets a share premium, and the management doesn’t retain control).
A deal might still be branded one way or the other (to explain away the lack of premium by calling it a merger) but it’s not the same as the difference between, for example, an asset sale/purchase and stock sale/ purchase.