As an investor, you may have thought about this once or twice. Why is the phrase, "mergers and acquisitions" rarely seen as "acquisitions and mergers"? It is not as though reversing the word order in the phrase would change what these investments are. It may have something to do with the fact that both are related types of investments, but they are still unique and different from each other. Here is a clearer explanation of these investments and what separates them.
Mergers Merge a Company with Another to Strengthen It and Increase Profits
If you buy a company to merge with your own company, it is for two reasons. One, the company you buy has the ability to strengthen and bolster your own company, thereby keeping your company from going bankrupt. Usually, the stronger company buys the weaker company, but the roles can be reversed in the purchasing process.
Two, the other company has a lot of products you know your own company can benefit from, or promote in a way that increases profits for everyone in both companies. You merge, rather than sell off, any part of the company. It is an investment to increase profits and make both companies stronger and more profitable. If you own a company, a merger is likely going to be your preference.
Acquisitions Could Divide Companies and Sell the Parts
Can you merge with an acquisition? Sure, you could, but a lot of times, when you acquire a company as an "acquisition" for investment purposes, your intent is to break the company up into manageable chunks or smaller corporations, and then sell off those smaller chunks to the highest bidder. It is a very profitable way to invest, and often with very little risk to yourself.
Many investors like the acquisitions part of mergers and acquisitions because it gives them a lot more options to make more money if they choose. It is, however, not a favorable position for the acquired companies because many people could lose their jobs or the company could be completely restructured and people would find themselves working in very different capacities. Compared to mergers, acquisitions are the secondary and somewhat less favorable option for the companies that are looking for investors to help them out of their financial difficulties and prevent bankruptcy.
If you have more questions about mergers and acquisitions, contact local financial services who can look at your company's financial help and determine which option is in your favor.