In broad terms, the abbreviation M&A refers to Merger and Acquisition operations: transactions between two companies aimed at altering the original setup of two or more businesses and are often planned during ownership changes, generational changes or transitions from family to managerial ownership with the main objective of developing the company’s potential.

In many cases, they represent an opportunity for companies to relaunch themselves in the domestic and foreign markets, be more competitive in their target sector, optimize management processes, achieve economies of scale, and diversify and expand their business.

Specifically, mergers and acquisitions hold different meanings. Let’s delve into them:

A merger is an agreement between two separate companies to create a new entity. Among the obligations arising from this transaction, the involved companies must combine their resources to form a unique, larger entity. 

Acquisition refers to the transfer of ownership of a company – or a part of it – under the control of another entity. This transfer can occur through the purchase of shares or the acquisition of assets. Following the acquisition, the acquired company becomes part of the acquirer, losing its independence as a separate entity. 

It becomes clearer that the main difference between a merger and an acquisition lies in the power balance within the new entity. In the former, the involved companies become partners and thus share control over the new company. At the same time, in the case of an acquisition, one entity cedes corporate control to the other.

In each of these operations, typically, two entities are involved. They become partners in the case of a merger, co-owners of the resulting entity, and remain distinct in the case of an acquisition. In the latter situation, there’s an acquirer (the acquiring company) and a target (the company being acquired).