5.MoreInformationBackDistinctionbetweenmergersandacquisitionsWhenonecompanytakesoveranotherandclearlyestablishesitselfasthenewowner,thepurchaseiscalledanacquisition.Fromalegalpointofview,thetargetcompanyceasestoexist,thebuyerswallowsthebusinessandthebuyersstockcontinuestobetraded.5.MoreInformationBackDistinctionbetweenmergersandacquisitionsInthepuresenseoftheterm,amergerhappenswhentwofirms,oftenofaboutthesamesize,agreetogoforwardasasinglenewcompanyratherthanremainseparatelyownedandoperated.Thiskindofactionismorepreciselyreferredtoasamergerofequals.Bothcompaniesstocksaresurrenderedandnewcompanystockisissuedinitsplace.5.MoreInformationBackBackDistinctionbetweenmergersandacquisitionsInpractice,however,actualmergersofequalsdonthappenveryoften.Usually,onecompanywillbuyanotherandsimplyallowtheacquiredfirmtoproclaimthattheactionisamergerofequals,evenifitistechnicallyanacquisition.ApurchasedealwillalsobecalledamergerwhenbothCEOsagreethatjoiningtogetherisinthebestinterestofbothoftheircompanies.5.MoreInformationBackDistinctionbetweenmergersandacquisitionsWhetherapurchaseisconsideredamergeroranacquisitionreallydependsonwhetherthepurchaseisfriendlyorhostileandhowitisannounced.Inotherwords,therealdifferenceliesinhowthepurchaseiscommunicatedtoandreceivedbythetargetcompanysboardofdirectors,employeesandshareholders.5.MoreInformationBackMotivesbehindmergersandacquisitionsEconomyofscaleIncreasedrevenueormarketshareCross-sellingTaxationGeographicalorotherdiversification:ResourcetransferVerticalintegrationBusinessEnglishReadingForeignLanguageTeachingandResearchPressBusinessEnglishReadingForeignLanguageTeachingandResearchPressBusinessEnglishReadingForeignLanguage