The Difference between Mergers and Acquisitions

Mergers and Acquisitions pic

Mergers and Acquisitions

Experienced entrepreneur Kenneth (“Ken”) Goggans has founded several oil-and-gas-related companies over the years. In 2013, Ken Goggans established a holding company, for the purpose of acquiring a collection of smaller businesses in the oil and gas services industry.

Known by M&A, mergers and acquisitions refer to transactions wherein a larger company purchases a smaller one, thereby obviating the need to expand, finance, or supplement existing operations from the ground up.

In a merger, two businesses combine to form a single, more effective enterprise. This typically results in the smaller of the two organizations relinquishing its name in favor of that of the larger one and a new organizational chart that can accommodate executives of both companies.

By contrast, in an acquisition, a larger company purchases a majority stake in a smaller one. By operating the latter as its own, the larger company can bring its resources to bear to increase the smaller company’s output.