What differentiates a merger from an acquisition?

The correct answer highlights a fundamental aspect that distinguishes a merger from an acquisition. In a merger, two or more companies come together to form a new entity, which means they combine their resources, assets, and operations to create a unified organization. This often involves forming a new brand identity or corporate structure that represents the combined strengths of the original companies.

On the other hand, an acquisition occurs when one company purchases another, taking control and absorbing it into its existing structure without the formation of a new entity. In an acquisition, the acquired company ceases to exist as an independent entity; it operates under the acquiring company's brand and management.

Understanding this key distinction can clarify the strategic intents behind each action, as mergers are often pursued for collaboration and synergy, while acquisitions may focus on market dominance or expanding product offerings.