Differences Between Merger, Acquisition, and Sale of a Business
Some people use the terms “merger,” “acquisition,” and “sale of business” interchangeably without understanding that these three terms describe different concepts. It is imperative that you understand what each of these concepts means and what makes them different to find the right course of action for your business.
- Merger. A merger happens when two companies combine to form a new entity. In this scenario, both companies are equal, and they share the ownership of the new company. A merger helps achieve growth, increase market share, or pool resources. When two firms merge, they become one entity, which means there is no selling or buying of shares involved. Instead, both companies work together to restructure and create a single, stronger entity.
- Acquisition. An acquisition – also referred to as a “takeover” or buyout – happens when one company purchases the other. The company buying the other is known as the acquirer, while the company being bought is known as the target. The acquirer takes over the target’s assets, liabilities, and other obligations. In most cases, acquisition takes place by purchasing the target’s shares. A company may opt for an acquisition transaction to achieve business growth and expand its portfolio or its presence in the market.
- Sale. A business sale is when a company sells its business to another company or individual. When this happens, the seller gives up all ownership rights and responsibilities to the buyer, who, in turn, takes over the company’s assets and liabilities. A business sale is initiated to achieve various goals, such as retiring, moving to a new career path, or getting out of a business that is not profitable, to name a few.
Our mergers and acquisitions lawyer at Linn Legal has many years of experience helping small, medium, and large businesses in Cincinnati, Ohio navigate the complexities of M&A deals. We have the necessary expertise and knowledge to guide you through your transaction to ensure everything goes smoothly and in accordance with the applicable laws and regulations.Contact Us