Acquisition

What's the difference between mergers and acquisitions?

When two companies merge, they generally, uh…are attracted to each other…and hopefully respect each other. They share stock or combine the stocks of each side, and combine, um... efforts. And then cuddle afterwards. If they are successful at the merger, then the combination of two roughly equals yields more than the one-plus-one combo that made them. So two companies get together on generally equal-ish footing.

Acquisitions are a combining...like that alien-eating thing...on much different footing. The large company eats, or buys, the target, either using its more highly valued stock and/or cash to do so. Why would a company acquire another? Well, the target might have 100 employees, 90 of whom can be fired with massive expense savings for the acquirer, such that, economically, the acquisition just makes sense.

Acquisitions happen for market power reasons as well. Like…imagine the negotiating leverage if Amazon bought the next five biggest online retailers. Probably not legal, given the monopoly-like dominance of AMZN...but wow, that would be a powerful set of acquisitions. And Bezos would grow even more powerful. Maybe too powerful.