One plus one makes three: this equation is the special alchemy of a merger or an acquisition.

The key principle behind buying a company is to create shareholder value over and above that of the sum of the two companies. Two companies together are more valuable than two separate companies - at least, that's the reasoning behind M&A. Although they are often uttered in the same breath and used as though they were synonymous, the terms merger and acquisition mean slightly different things. When one company takes over another and clearly established itself as the new owner, the purchase is called an acquisition. From a legal point of view, the target company ceases to exist, the buyer "swallows" the business and the buyer's stock continues to be traded. In the pure sense of the term, a merger happens when two firms, often of about the same size, agree to go forward as a single new company rather than remain separately owned and operated. This kind of action is more precisely referred to as a "merger of equals." Both companies' stocks are surrendered and new company stock is issued in its place. For example, both Daimler-Benz and Chrysler ceased to exist when the two firms merged, and a new company, DaimlerChrysler, was created. In practice, however, actual mergers of equals don't happen very often. Usually, one company will buy another and, as part of the deal's terms, simply allow the acquired firm to proclaim that the action is a merger of equals, even if it's technically an acquisition.

Acquisitions As you can see, an acquisition may be only slightly different from a merger. In fact, it may be different in name only. Like mergers, acquisitions are actions through which companies seek economies of scale, efficiencies and enhanced market visibility. Unlike all mergers, all acquisitions involve one firm purchasing another - there is no exchange of stock or consolidation as a new company. Acquisitions are often congenial, and all parties feel satisfied with the deal. Other times, acquisitions are more hostile. In an acquisition, as in some of the merger deals we discuss above, a company can buy another company with cash, stock or a combination of the two. Another possibility, which is common in smaller deals, is for one company to acquire all the assets of another company. Company X buys all of Company Y's assets for cash, which means that Company Y will have only cash (and debt, if they had debt before). Of course, Company Y becomes merely a shell and will eventually liquidate or enter another area of business.

When one company takes over another and clearly establishes itself as the new owner, the purchase is called an "acquisition". From a legal point of view, in an acquisition, the target company still exists as an independent legal entity, which is controlled by the acquirer. In the pure sense of the term, a merger happens when two firms agree to go forward as a single new company rather than remain separately owned and operated. This kind of action is more precisely referred to as a "merger of equals". The firms are often of about the same size. Both companies' stocks are surrendered and new company stock is issued in its place. For example, in the 1999 merger of Glaxo Wellcome and SmithKline Beecham, both firms ceased to exist when they merged, and a new company, GlaxoSmithKline, was created. In practice, however, actual mergers of equals don't happen very often. Usually, one company will buy another and, as part of the deal's terms, simply allow the acquired firm to proclaim that the action is a merger of equals, even if it is technically an acquisition.

Merger The case when two companies (often of same size) decide to move forward as a single new company instead of operating business separately. The stocks of both the companies are surrendered, while new stocks are issued afresh. For example, Glaxo Wellcome and SmithKline Beehcam ceased to exist and merged to become a new company, known as Glaxo SmithKline.

Acquisition The case when one company takes over another and establishes itself as the new owner of the business. The buyer company swallows the business of the target company, which ceases to exist. Dr. Reddy's Labs acquired Betapharm through an agreement amounting $597 million.

An arrangement between two companies that have decided to share resources to undertake a specific, mutually beneficial project. A strategic alliance is less involved and less permanent than a joint venture, in which two companies typically pool resources to create a separate business entity. In a strategic alliance, each company maintains its autonomy while gaining a new opportunity. A strategic alliance could help a company develop a more effective process, expand into a new market or develop an advantage over a competitor, among other possibilities.

An arrangement between two companies that have decided to share resources to undertake a specific, mutually beneficial project. A strategic alliance is less involved and less permanent than a joint venture, in which two companies typically pool resources to create a separate business entity. In a strategic alliance, each company maintains its autonomy while gaining a new opportunity. A strategic alliance could help a company develop a more effective process, expand into a new market or develop an advantage over a competitor, among other possibilities.

An arrangement between two companies that have decided to share resources to undertake a specific, mutually beneficial project. A strategic alliance is less involved and less permanent than a joint venture, in which two companies typically pool resources to create a separate business entity. In a strategic alliance, each company maintains its autonomy while gaining a new opportunity. A strategic alliance could help a company develop a more effective process, expand into a new market or develop an advantage over a competitor, among other possibilities. Partners may provide the strategic alliance with resources such as products, distribution channels, manufacturing capability, project funding, capital equipment, knowledge, expertise, or intellectual property Joint venture and Strategic Alliance differ from each other financially and legally too. There is difference between them in their definitions too. A joint venture is indeed a contractual agreement between two or more companies that come together in business in terms of the performance of a business task. A strategic alliance on the other hand is a formal relationship between two or more companies in pursuit of common goal in their business even while remaining as independent organizations. This is the main difference between the two terms joint venture and strategic alliance. In other words it can be said the two or more companies that join together in a joint venture do not remain as independent companies in a joint venture. On the other hand the two or more companies that join together in a strategic alliance will remain as independent organizations in a strategic alliance.

A unoin of two or more parties who contractually agree to contribute to a specific task for specified time period. Under JV two firms join and form a separate legal entity and operate ar per partnership Act. The JV can be between individuals or corporations. While Stategic Alliance is mutual Coordination of strategic planning and management in order to achieve long term objectives between two organisations. under this , each organisation will work

independently and no separate entity is formed. SA is considered as less risky due to less legalities. JV A joint venture is a legal partnership between two(or more) companies where in they both make a new (third) entity for competitive advantage. With a JV you will have something more than simple governance; you'll have a completely new entity with a board, officers, and an executive team. Effectively a JV is a completely new organization, but owned by the founding participants. The board of directors generally is constructed with representatives of the founding organizations. This new company will "do business" with the founding entities-usually as suppliers. e.g. Uninor was a joint venture between Unitech(India) and Telenor(France) and KPIT Cummins is a joint venture between KPIT and Cummins Infosystems.

Strategic Alliance : SA is a kind of partnership between two entities in which they take advantage of each others core strengths like proprietary processes, intellectual capital, research, market penetration, manufacturing and/or distribution capabilities etc. They share their core strengths with each other. They will have an open door relationship with another entity and will mostly retain control. The length of agreement could have a sunset date or could be open-ended with regular performance reviews. However, they simply would want to work with the other organizations on a contractual basis, and not as a legal partnership. e.g. HP and Oracle had a strategic alliances wherein HP recommended Oracle as the perfect database for their servers by optimizing their servers as per Oracle and Oracle also did the same.

A joint venture (JV) is a business agreement in which parties agree to develop, for a finite time, a new entity and new assets by contributing equity. They exercise control over the enterprise and consequently share revenues, expenses and assets. There are other types of companies such as JV limited by guarantee, joint ventures limited by guarantee with partners holding shares.

A joint venture takes place when two parties come together to take on one project. In a joint venture, both parties are equally invested in the project in terms of money, time, and effort to build on the original concept. While joint ventures are generally small projects, major corporations also use this method in order to diversify. A joint venture can ensure the success of smaller projects for those that are just starting in the business world or for established corporations. Since the cost of starting new projects is generally high, a joint venture allows both parties to share the burden of the project, as well as the resulting profits.

Since money is involved in a joint venture, it is necessary to have a strategic plan in place. In short, both parties must be committed to focusing on the future of the partnership, rather than just the immediate returns. Ultimately, short term and long term successes are both important. In order to achieve this success, honesty, integrity, and communication within the joint venture are necessary. The cooperation of two or more individuals or businesses in which each agrees to share profit, loss and control in a specific enterprise.

A contractual agreement joining together two or more parties for the purpose of executing a particular business undertaking. All parties agree to share in the profits and losses of the enterprise.