Merger refers to consolidation of two or more companies to form an all-new entity with a new name. Merger assists the companies in uniting their strengths, resources and weaknesses. Merger leads to a reduction in trade barriers and competition.
The ownership and management structure of the new entity remains almost similar to the previous two entities. In an acquisition, the acquiring company owns the management of the entire organization.
In the fast-paced corporate world, mergers are occasionally seen. However, extreme competition prevailing in the market leads to a number of acquisitions. The companies involved in gain the advantage of financial benefit, synergy, taxation and increase in competitiveness. However, adverse effects such as clash in the culture of the entities and increase in employee turnover are also noted.