When you are just beginning to touch the surface of business and corporate law, you may hear a lot about mergers and acquisitions. You typically hear them side by side in conversation. While they are always thought of as together, they are actually very different in their definition. Lucé Law always wants our clients to understand legal terms extensively so they can make informed decisions. Here are a few key differences between mergers and acquisitions.
A merger is when two business entities combine to create a new organization. A new company is born by the combination of the two businesses. An acquisition is when one business takes over another business and no new company is created. Instead, the one business simply absorbs the other company. Sometimes an acquisition is referred to as a “takeover.”
The key difference between a merger and an acquisition is that a new organization is created in a merger. Sometimes you may hear management referring to an acquisition as a merger, but unless a new entity is being created, that is an incorrect use of the term. However, there is a growing trend in referring to the transactions that occur during these events as merger and acquisition transactions, rather than referring to one or the other. The increasing popularity in referring to these terms has slowly started to change the definition.
Need an Attorney?
Whether your organization is going through a merger or an acquisition, you will need legal assistance. There are many legal components and complex issues that arise during a merger or acquisition. The team at Lucé Law Firm can assist you and your company with whatever comes your way.