Difference Between Mergers and Acquisitions – complete details
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Difference Between Mergers and Acquisitions
Although they are often uttered in the same sense and used as though they were synonymous, the terms merger and acquisition mean slightly different things. Merger and acquisition is often known to be a single terminology defined as a process of combining two or more companies together. The fact remains that the so called single terminologies are different terms used under different situations. Though there is a thin line difference between the two but the impact of the kind of completely different in both the cases.
Let’s have a discussion about this.
A merger, in a nutshell, involves two corporate entities joining forces and becoming a new business entity, with a new name. It usually involves two companies of same size and stature joining hands. This kind of action is more precisely referred to as a “merger of peers” Both companies’ stocks are surrendered and new company stock is issued in its place. In case of mergers the deal gets finalized on friendly terms and both the companies share equal profits in the newly created entity.
Famous mergers in India during 2014 :
1.RIL – Network 18 Media and Investments
Reliance Industries Limited (RIL)took over 78% shares in Network 18in May 2104forRs 4,000 crores
2.Ranbaxy – Sun Pharmaceuticals
The deal,worth $4 billion, will lead to a 16.4 dilution in the equity capital of Sun Pharma.
3.TCS – CMC
Tata Consultancy Services (TCS), the $13 billion flagship software unit of the Tata Group, has announced a merger with the listed CMC with itself as part of the group’s renewed efforts to consolidate its IT businesses under a single entity.
4.Tata Power – PT Arutmin Indonesia
5. Flipkart – Myntra.
an acquisition may be only slightly different from a merger. When one company takes over the other and rules all its business operations, it is known as acquisitions. In this process of restructuring, one company overpowers the other company and the decision is mainly taken during downturns in economy or during declining profit margins. Among the two, the one that is financially stronger and bigger in all ways establishes it power. The combined operations then run under the name of the powerful entity who also takes over the existing stocks of the other company.
1.Tata Group acquired Corus an United Kingdom based company in 2006. The deal size was$12.98 billion.
2. Bharti Airtel acquired Zain Africa a Kenya based company in February 2010. Deal size was $10.7 billion.
3. Hindalco Industries acquired Novelis a Canada company in February 2007. $5.73 billion was its deal size.
4. Tata Motors Ltd acquired Jaguar Cars and Land Rover an United Kingdom based entity….deal size of which was $2.3 billion.