Don’t we always hear the terms together; Mergers AND Acquisition or M&A? But can it be both at the same time? If not, why does the term infer they are linked; as in one?
As of this writing I am in San Francisco, co-facilitating the AMA’s course on, you guessed it, Mergers & Acquisitions. I posed this question to my 2 colleagues, David Braun & Alexander Lee, to get their take on this.
Now, according to Investopedia, Mergers And Acquisitions – M&A is a general term used to refer to the consolidation of companies. A merger is a combination of two companies to form a new company, while an acquisition is the purchase of one company by another in which no new company is formed. So they are not the same; or are they?
David (the founder of the Virginia-based Capstone, The Growth Engineers®) answered this way, “Well upon reflection it can be both…an acquisition that is completed through a merger transaction. I think over the years the words have become synonymous…the industry lingo uses the terminology “M&A” to mean an acquisition without defining the legal form of the transaction. Plus, it sounds better than “we are working on an A”. (Good point).
Makes sense to me. Like a lot of nomenclature (industry specific terminology), those who work in an industry tend to shorten frequently-used terms and develop an alphabet of abbreviations. M&A appears to refer to a range of transactions, many of which blur the lines between the traditional definitions of either Merger or Acquisition.
Alexander (a partner in the tax department of the law firm Paul Hastings) continues, “Technically, a merger is a type of Acquisition. However, because it does not involve the direct acquisition of stock or assets, but instead requires an amalgamation of entities under state statutes, the industry tends to treat it as its own subset.
In other words, once again, it depends. Technically, they refer to different types of business consolidations. Yet they are commonly used interchangeably and it allows everyone to refer to an entire range of transactions by just 2 letters; or is it 3 with the ampersand?
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