Merger vs. Acquisition

Often times we talk about mergers and acquisitions as being one in the same (ever hear the term M&A), but I look at these as two distinctly different transactions.  My thought is that it really goes to the reason you are making the transaction.  The main purposes of M&A is to acquire market share, remove a threat, advance your technology/products, or gain entrance into a new area.   The main differentiator to me is the people and culture pieces to the transaction.  This is not saying that an acquisition or merger is better, but there is a distinct difference.  

If you are just doing an acquisition, then you probably are not focused on the culture of the organization that you acquiring and how it will integrate into yours.  There may be some key folks that you want to ensure you keep for a period of time, but once this period has ended you may see them head out the door.  This becomes very evident during the due diligence process between the two organizations.  In short, acquisitions are focused more on things than people.

Many people confuse mergers as a coming together of two equals.  You often see this play out in the media with companies making this exact statement.  This does not work and is one of the primary reasons that 75% of all M&A’s fail to realize the perceived value of the transaction.  There is always one who does the acquiring and one who is acquired, and they should not be confused.  The acquirer must take the lead, and you need a strong framework that will allow you to quickly realize value for the transaction and focus on the most important items to integrate.  The real difference is that mergers also take a close look at the culture and people of the organization you are looking to acquire and how they will contribute and drive forward the value of the combined organization.  Merging cultures and people is one of the most challenging aspects of an acquisition, but it can pay huge dividends if done correctly.

So the next time you are considering an M&A deal, ask yourself if this is going to be a merger or an acquisition.