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Mergers and acquisitions or M&A as it is commonly called, refers to the aspect of corporate strategy, corporate finance and management dealing with the buying, selling, dividing and combining of different companies and similar entities. It can help an enterprise grow rapidly in its sector or location of origin, or a new field or new location, without creating a subsidiary, other child entity or using a joint venture. The distinction between a “merger” and an “acquisition” has become increasingly blurred in various respects particularly in terms of the ultimate economic outcome. The terms mergers and acquisitions mean slightly different things. From the business point of view, a merger can be achieved independently of the corporate mechanics through various means such as triangular merger, statutory merger, and acquisition. The purchase is called an acquisition when one company takes over another and clearly establishes itself as the new owner. From a legal point of view however, the target company ceases to exist the moment the buyer takes over the business and the buyer’s stock continues to be traded.

A merger happens when two firms agree to continue as a single new company rather than remain separately owned and operated. This kind of business strategy is more precisely referred to as a merger of equals. The firms are often of about the same size and both of the companies’ stocks are surrendered and new company stock is issued in its place. The actual mergers of equals don’t happen very often in reality. In common practice, one company will buy another and, simply allow the acquired firm to proclaim that the action is a merger of equals as part of the deal’s terms, even if it is technically an acquisition. Being bought out often carries negative connotations; therefore, deal makers and top managers try to make the takeover more palatableby describing the deal euphemistically as a merger. A purchase deal will also be called a merger when both of the companies’ chief executive officers agree that joining together is in the best interest of both of their companies. But when the deal is unfriendly such as when the target company does not want to be purchased, it is always regarded as an acquisition.