What M&A Means
M&A stands for mergers and acquisitions, the family of deals in which companies combine, change hands, or split apart. Mergers, acquisitions, joint ventures and divestitures differ in their legal form and in who controls the outcome.
Mergers: two companies becoming one. In a merger, two companies agree to combine into a single business. Legally, one company may absorb the other and continue on, or both may be folded into a new entity. Mergers are sometimes described as a combination of equals, and the two boards usually negotiate the terms together. Control is shared in principle: leadership roles and ownership of the combined company are settled by agreement, though in practice one side often ends up with more influence.
Acquisitions: one company taking control of another. In an acquisition, a buyer takes control of a target company, usually by purchasing its shares or its assets. The buyer is clearly the controlling party, and the target either becomes a subsidiary or is absorbed. The legal form differs from a merger because there is a buyer and a seller rather than a pooling of two companies. A deal can be friendly, with the target's board agreeing, or hostile, with the buyer going directly to shareholders. Control of the outcome sits with the acquirer.
Joint ventures and divestitures. A joint venture is an arrangement in which two or more companies create a shared project or a separate business together. Each parent stays independent, and the partners share ownership, costs and decisions according to their agreement. Control is split between the partners rather than passing to one.
A divestiture is the opposite of buying: a company sells or spins off a part of itself, such as a division or business unit. The seller chooses what to let go, often to focus on its core business or raise funds. Control of that unit passes to its new owners: a buyer in a sale, or the parent's own shareholders in a spin-off, where the unit becomes a separate company.
Telling the deal types apart by form and control. Two questions separate the deal types. First, what is the legal form: do two companies combine, does one buy another, do partners create a shared entity, or does a company sell a part of itself? Second, who controls the outcome: both sides together in a merger, the buyer in an acquisition, the partners jointly in a joint venture, and the unit's new owners in a divestiture. Sorting a short deal example means asking these two questions in turn. A company that purchases a rival and keeps running it as its own subsidiary is an acquisition. Two firms that form a new jointly owned company for one project, while each continues on its own, is a joint venture.
