How Does a Merger Differ from an Acquisition

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The Answer is An acquisition occurs when one corporation buys controlling interest in another firm. The firm being acquired ceases to exist as an independent entity, while the acquiring firm continues to operate. A merger occurs when two formerly independent firms agree to combine and form a new business entity. There are three basic types of mergers: horizontal, vertical, and conglomerate. A horizontal merger is a combination of firms in the same industry. This type of merger enables the firm to achieve more power and control within a given market. It may also allow the new firm to be more efficient through the elimination of duplicate facilities and personnel. A vertical merger is between firms that are at different stages in the production process for a good or service. This type of merger may allow tighter integration of production and increased control over the supply of resources and inputs. A conglomerate merger is between firms that are in unrelated industries. A key reason cited for this type of merger is the desire to reduce risk by making the firm less vulnerable to adverse conditions in any single market.

How Does a Merger Differ from an Acquisition

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How Does a Merger Differ from an Acquisition

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Correct Answer:
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