What is the primary distinction between a merger and an acquisition?

The primary distinction between a merger and an acquisition lies in the nature of the transaction. A merger occurs when two companies come together to form a new entity, effectively dissolving their individual identities to create a single organization. This collaboration typically implies a sense of equality or partnership between the companies, as both are integral in crafting the new corporate structure.

In contrast, an acquisition involves one company taking over another, where the acquiring company maintains its identity while absorbing the target company. The target company may cease to exist as a separate entity, but the transaction itself is more about control than collaboration.

Understanding this distinction is essential as it impacts various elements of business strategy, corporate structure, and regulatory considerations. Mergers often suggest a more mutual agreement, while acquisitions may signal dominance by one party over another.