What is the key difference between a merger and an acquisition?
A)The target firm ceases to exist after a merger, but can continue on after an acquisition.
B)The target firm ceases to exist after an acquisition, but can continue on after a merger.
C)An acquisition requires the approval of both sets of shareholders from the two firms.
D)There is no difference between a merger and an acquisition.

Question

Quizplus · Accepted Answer

The key difference between a merger and an acquisition is that in a merger, two companies combine to form a new single entity, while in an acquisition, one company takes over another company and the target firm may continue to exist as a subsidiary of the acquiring company or may be merged into the acquiring company. Therefore, the target firm ceases to exist after an acquisition, but can continue on after a merger. Option A is incorrect because it states the opposite of the correct answer. Option C is not always true as some acquisitions may not require the approval of both sets of shareholders. Option D is incorrect as there is a clear distinction between the two terms.

What Is the Key Difference Between a Merger and an Acquisition