Comparison Essay Merger vs. Acquisition
Distinguishing a merger from an acquisition is often confusing to many people, but with a comparison essay: merger vs. acquisition, you can easily define the two practices. The terms merger and acquisition are usually used together, the main reason why most people think that they refer to one thing. The two business practices have similarities and slight differences that you must be able to outline in order to effectively understand the concepts.
A merger occurs when two separate businesses join forces or come together to form a single entity. Businesses that enter into this agreement are usually about the same size. This implies a new company is formed to collectively handle the operations of the businesses that have teamed up. An acquisition on the other hand, is whereby a business buys or takes over another business, which then operates under the former. In an acquisition, the business which is bought becomes part of the purchasing company. Besides, its assets are dissolved into the larger company upon the completion of the acquisition process.
The Key Areas of focus in a Comparison Essay on Merger vs. Acquisition
Generally, a comparison essay: merger vs. acquisition should address the disparities and shared properties between the two processes. However, it should be noted that there are key specific areas or features of mergers and acquisitions that should be discussed in order to make a proper comparison.
The following are some of the main areas to be be addressed in the comparison essay: merger vs. acquisition.
- Conditions for a merger and acquisition
- The number of parties that can be involved in the arrangements
- Reasons why businesses can enter into a merger
- Reasons for acquisition
- Success rates of both practices
Just like any other business agreements, there are various conditions for the formation of a merger or an acquisition. For both processes to occur, there has to be a mutual understanding between the parties involved. Mergers are usually pursued by businesses that deal in similar products and target a particular market. However, the conditions may vary depending on the needs or objectives of the businesses. Even the reasons for formation of a merger are different. However, the main reasoning behind formation of mergers and acquisitions is that two companies are better off together and more powerful than when working separately.
In the process of acquisition, the parties do not necessarily have to deal in the same sector or products. Usually, acquisitions occur in cases where smaller companies are unable to sustain their presence in the market. In order to avoid total collapse, the company chooses to sell its assets and shares to a larger one with investment interests in the business. Although the company being acquired may not give away all its resources, the purchasing company always gets the larger portion, giving it control over all the operations of the former.
In mergers, the two companies that come together contribute their resources, which are then shared in the operations of the new entity. Based on the terms of the merger, the contributions of every partner may vary, and this is reflected in the sharing of profits and responsibilities. However, it should be noted that decision making in mergers usually involve consultations with the parties in the agreement.
In acquisition, a business is dissolved into another and there is no sharing of resources. When a company is acquired by another, its assets, shares and operations are absorbed into the larger one. As a result of this, there is no sharing of resources among the two parties in the arrangement. It is upon the company that is interested in taking over another to meet the conditions set out by it.
Mergers usually take place between two companies, which may later on decide to involve another. However, even at the time of formation, the number of parties involved in the merger may vary depending on their goals. Similarly, there is usually no restriction on the number of businesses that can be acquired by a company. One larger company can choose to acquire as many smaller companies as it wishes, provided it meets the conditions for acquisition.
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References
http://www.essaysexperts.net/blog/sample-comparison-essay-on-merger-vs-acquisition/
http://www.investopedia.com/university/mergers/mergers1.asp
http://www.investopedia.com/ask/answers/021815/what-difference-between-merger-and-acquisition.asp
http://www.journalofaccountancy.com/issues/2002/nov/differencebetweenmergersandacquisitions.html