Mergers And Acquisitions

Mergers are like marriages in that both companies agree to the union, and both give up a certain amount of control and independence to become a new institution. After a merger, the newly combined entity takes on a new name and issues new stock in that name. Typically, mergers occur between companies of roughly equal size. Acquisitions, as the name suggests, are an outright purchase of one company by another, usually a larger company. Even the language surrounding acquisitions is more aggressive — the company being purchased is referred to as the “target company.” If the acquiring company buys 51% or more of the target company’s stock, it can assume control whether the target company likes it or not, in which case the acquisition is called a “hostile takeover.”