The consolidation of companies or assets through various forms of financial transactions. While the terms are often used interchangeably, they represent distinct concepts:
- Merger: Combining two companies into a single legal entity, typically to create synergies, expand market share, or reduce operational costs. In an actual merger, both companies cease to exist independently and form a new organization.
- Acquisition: The purchase of one company by another, where the acquired company may be absorbed or operate as a subsidiary. Acquisitions can be friendly or hostile and may involve purchasing a majority stake or full ownership.
M&A activity is common in competitive industries and is often driven by strategic goals such as market expansion, technology acquisition, vertical integration, or cost efficiencies. The process typically involves valuation, due diligence, negotiation, regulatory approval, and post-transaction integration.
Investment bankers, legal advisors, corporate development teams, and regulatory bodies are among the professionals involved in M&A. Successful M&A strategies can accelerate growth, but poorly executed deals risk financial losses, cultural clashes, or operational disruption.
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