Mergers and acquisitions are two closely related terms and are often listed together on a company's balance sheet as mergers and acquisitions (M&A). But there is an important distinction between these terms - in a merger, two companies become one and both original companies cease to exist; in an acquisition, the acquired company is absorbed by the acquiring company, and only the acquired company ceases to exist.
An acquisition, also sometimes called a takeover or buyout, usually involves the takeover of a smaller firm by a larger one. But there are occasions when a smaller firm will obtain the management control of a larger company, and in these cases the smaller acquiring firm will often keep the existing company name and brand in place for the new, combined company. Takeovers or acquisitions can be friendly, where the management of the company to be acquired negotiates a deal with the acquiring company; or, they can be hostile, where the takeover is made despite opposition by the company's management or an offer is made without prior knowledge by the company's board of directors.
An acquisition can be carried out in one of two ways: