According to the information available in the Investment Encyclopedia Investopedia, the main idea for Mergers and Acquisition is to make real the equation "one plus one equals three", which means that two companies, when working together, can create more value than the whole of those two. "Two companies together are more valuable than two separate companies - at least, that's the reasoning behind M&A" (Investopedia, n/a).
These two concepts can be mistakenly taken by the same thing, then, I will give a definition for each one to make a basic differentiation.
Merger. "The combining of two or more companies, generally by offering the stockholders of one company securities in the acquiring company in exchange for the surren
der of their stock" (Investopedia Dictionary, n/a).
This is basically, when two companies become one. This is a mutual decision between both companies and neither of them is placed over the other.
Acquisition. "A corporate action in which a company buys most, if not all, of the target
company's ownership stakes in order to assume control of the target firm. Acquisitions are often made as part of a company's growth strategy whereby it is more beneficial to take over an existing firm's operations and niche compared to expanding on its own. Acquisitions are often paid in cash, the acquiring company's stock or a combination of both" (Investopedia Dictionary, n/a).
In other words, acquisition is when a company buys another one's stocks and becomes the "owner" of that target company. Acquisitions may be friendly or not, whether the target company (the one bought) expresses its agreement to be acquired or not.
One of the most interesting cases that I was able to find is the merge between NEAH Power Systems (a company researching the technology of fuel cells) and EKO Vehicles (a company that makes hight performance electric two wheelers).
The full article can be found in EVWorld here.
This article shows that NEAH Power has signed a letter to explore a little bit more in the area of EKO's Vehicles to make a merger or an acquisition, which is not decided yet, to produce scooters that work with electric energy.
Probably, the idea is to merge both companies and create a new one like the alliance the teacher showed to us in class a time ago between Chrysler and Fiat.
Here's an animation case with the merge of two companies that didn't work at the beginning, and shows what was done to overcome those issues. Pretty educative, I hope you enjoy it.
Bibliography
Mergers and acquisitions are typical conditions used to make reference to the combination of organizations. A merging outcomes when two organizations come together to type a single company. Mergers are just like products, not including that in mergers, current stockholders of both organizations sustain a distributed interest in the new increased enterprise.
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