企業の合併や買収は総称して“M&A”(エムアンドエー)と呼ばれますが、その“M&A”、“Mergers and Acquisitions”の略だということをご存知の方は多いと思います。
“Mergers” and “Acquisitions”: What’s the Difference?
By Liz Agawa
It’s the buzzword nowadays: Mergers and Acquisitions. It is also known as the acronym, “M&A”. Interestingly enough, this small acronym is comprised of two unequal words which can spell either success for the buying company or possible layoffs for some in the target company.
As speakers of Business English, it is possible to think that the terms ‘merger’ and ‘acquisition’ can be used interchangeably due to similarities in meaning. Yet, a nuance actually exists between the two. Today, let us “peel the onion” on the basic definitions of each word as well as discuss a few implications each process has on companies.
Firstly, the word ‘merger’ comes from the root word ‘merge’—a verb which means, “to combine or unite into a single enterprise, organization, or body.” On the other hand, ‘acquisition’ comes from the root word ‘acquire’, meaning: “to come into possession or ownership of”.
Basically speaking, when two companies of equal size (or one of which is larger) come together to create a potentially beneficial entity for both parent companies, we call this a “merger”. This action is likewise known by the formula, “One plus one makes three” . It would be helpful for us to remember that a merger is, in almost every case, friendlier in nature than an acquisition: Although there could be inevitable layoffs in the smaller company, at least the goal for both companies is to head towards a more positive direction of enhanced synergy and improved sales.
On the contrary, when a larger and more influential company (the buyer) decides to buy out a smaller, failing one (the target, which in some cases has previously incurred a debt) we call this an “acquisition”—the buyer takes over the target’s operations and shares, even its debt. This causes the target to cease operation, with the buyer continuing to trade its own stock.
Note: In the case of the buyer having bought the majority of shares in the target, the former actually can manoeuvre the latter’s board of directors into selling out. At times the target company’s board is hostile to the idea, but the buyer goes ahead and aggressively buys them out anyway (also called a hostile takeover )!
So, before a buying company decides on whether to merge or to acquire a target company, it considers the following factors as outlined below:
(When deciding on a merger)
-In the long run, will our company benefit from the synergy created by pooling together all our resources (including the HR) already present in both our companies?
-Is their board friendly to us? (If not, do we have control over most of their shares?)
-Will this action ensure that both of our companies would not only survive, but thrive?
(When deciding on an acquisition)
-Have we bought the majority of shares, that we can out-manoeuvre the board in case of hostility?
-Will acquiring the target bring more diversity to our company? [For example: If Company A sees potential growth in purchasing Company B (yet they are of different industries) “A” can buy out “B”, changing “B’s” name to “A’s”].
-And, finally: Will this acquisition create a profitable expansion in our market share?
There you have it: We’ve discussed the definitions of a “merger” and an “acquisition”; explained the processes and implications of each action; and, outlined the points to ponder if you own a company facing an event horizon.
As we say on Level 6, Lesson 18: “The ball is now in your court.”