What is the main difference between a merger and an acquisition?

The main distinction between a merger and an acquisition lies in the nature of the companies involved and how they combine. A merger typically occurs between two companies of reasonably equal size and value, leading to a new entity that combines both businesses under a joint name or structure. This mutual agreement reflects a sense of partnership where both companies aim to pool their resources, strengths, and capabilities.

In contrast, an acquisition usually involves one company purchasing another, generally larger or more dominant in the market, allowing the acquiring company to expand its operations or enter new markets. The acquired company may lose its identity and operate under the acquirer's brand, which contrasts with how a merger, being more collaborative, often retains the identities of both parties in a new combined company.

This understanding clarifies that while the choice correctly identifies the essence of a merger as combining equally valued companies, it does not encompass the potential nuances of other choices, like naming conventions or the industry requirement, which aren't universally applicable to define the difference between these two strategies.