On the buy side, the acquiring company might want access to certain technologies, resources, position in the market, or talent on the sell side, the target company may want greater financial or market security. Organizations have many reasons to choose M&A, but they essentially boil down to increasing synergy, the idea that when combined, two entities will be more powerful or competitive than they would each be on their own. However, both terms generally refer to the consolidation of assets and liabilities that occurs when two entities combine into one. An acquisition occurs when one company (called the acquiring company) buys another, smaller company (called the acquired or target company). A merger occurs when two companies of equal size or profitability come together, renounce their individual titles and stock, and continue as one unit.
Though the term M&A is common, mergers and acquisitions are actually two distinct concepts. The driving idea behind a merger or acquisition is that the companies together will be stronger, more competitive, or more profitable than they are by themselves. M&A stands for merger and acquisition, a phrase that describes two companies or organizations that combine into one entity.
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