What is a Merger?

A merger involves the mutual decision of two companies to combine and become one entity. The combined business, through structural and operational advantages secured by the merger, can cut costs and increase profits, boosting shareholder values for both groups of shareholders. A typical merger, involves two relatively equal companies, which combine to become one legal entity with the goal of producing a company that is worth more than the sum of its parts. In a merger of two corporations, the shareholders usually have their shares in the old company exchanged for an equal number of shares in the merged entity.

Example

In June 2015, UAP Holdings and Old Mutual Kenya merged and formed UAP-Old Mutual Group.

What is an Acquisition?

An acquisition is characterized by the purchase of a smaller company by a much larger one. Unlike in a merger, the acquiring firm usually offers a cash price per share to the target firm's shareholders or the acquiring firm's share's to the shareholders of the target firm according to a specified conversion ratio.

Example

In May 2015, Equity Group Holdings agreed to acquire 79% of ProCredit Bank Congo.

What is a Takeover?

A takeover occurs when a ​company gets ​control of another ​company by ​buying enough of ​its ​shares. It is virtually the same as an acquisition, except that the target company does not wish to be purchased.