Understanding Mergers & Acquisitions
Though the terms "mergers" and "acquisitions" are almost always used together in a business setting, they do not mean the same thing. There are similarities between the two business actions, and this results in a grouping of the words mergers & acquisitions more often than not. To grasp the meanings of the words, you should examine each separately before using them in your everyday language. Once you know what mergers & acquisitions are, you can confidently approach the situation.
Mergers often happen between two companies that are on relatively equal footing. This means they have similar size and strength so that when they are combined, one does not overshadow the other. The decision to pursue mergers is agreed upon by the companies involved, and a combined company name often results, as well. In the corporate world, mergers are the friendliest of business combinations and often leave both companies in an even stronger position when the deal is complete.
Acquisitions are an entirely different story. These often happen when a larger company purchases a smaller company. Also known as a buyout or a takeover, acquisitions are mostly friendly, but in some cases, they may be considered hostile. There is always the possibility of mass layoffs and terminations with an acquisition. Prior policies are sometimes rendered worthless as the larger company exerts its power over the smaller one. In most cases, the larger company retains the name, while the smaller company must acquiesce to a new titling.
Because mergers & acquisitions both refer to the act of two companies becoming one, they are often grouped together. Those that work in mergers & acquisitions understand the distinction and work hard to educate companies on the differences between the terms. The success of these business combinations always rests on the ability of employees and executives to understand the future roles of each company following the agreement. Even in a hostile takeover, there is always the distinct possibility that the employees of the smaller company will end up in a much better situation. Smaller companies that are acquired often experience more success under the power of the larger company, if for no other reason than the larger company has stronger financial resources and marketing.
Mergers & acquisitions can sometimes have a bad reputation, but the outcome doesn't have to be bleak. For the economy to continue to grow and prosper, the combination of businesses often needs to occur. Only by understanding the true nature of mergers & acquisitions can we accept the growth and prosperity that can follow.