Definition of Mergers and Acquisition

Increased globalization, the need to compete effectively in all markets and strategic motives by
firms and sovereign states have led to the rise of mergers and acquisition. Mergers and
acquisitions are often used interchangeably or together. However, there exists a distinction
between the two terms. Roberts, Wallace, & Moles (2016) observe that the distinction arises
from how the new entity is birthed. They identify a merger as a company arising from
negotiations of two firms to use synergies and create a new entity while an acquisition is
characterized by a larger firm buying off a lesser firm. It is worth noting that for an acquisition,
negotiations are not a prerequisite of the process.