Summary
Summary
- An acquisition is one company buying control of another. A merger is two companies combining into one, usually by share exchange, with the shareholders of both owning the combined business.
- In practice most "mergers" have a larger party, and most deals are legally acquisitions. The label often reflects how the deal is presented as much as its legal form.
- Deals can be horizontal (competitors), vertical (supplier or customer), adjacent (related products or markets) or conglomerate (unrelated). Buyers include strategic companies, private equity firms and permanent owners.
- Acquisitions can buy shares or assets, be paid in cash, shares or a mix, and include deferred or contingent payments.
- A typical private deal moves from strategy and sourcing through valuation, letter of intent, due diligence, the purchase agreement, completion and integration.
01 · Guides
Merger vs acquisition
Combination vs control.
| Row | Merger | Acquisition |
|---|---|---|
| What happens | Two companies combine into one | One company buys control of another |
| Typical payment | Shares in the combined company | Cash, shares or a mix |
| Who owns the result | Shareholders of both companies | The buyer's shareholders |
| Leadership | Often shared or negotiated | Buyer controls; target may keep its team |
| Brand | New or combined name, sometimes | Target may keep or lose its brand |
| How common | Less common in a pure form | Most transactions |
The term "merger of equals" describes two companies of similar size combining with roughly balanced ownership and leadership. True equality is rare. Legally, many mergers are structured as one company acquiring the other and then combining them. For an owner of a private company, almost every sale is an acquisition.
02 · Guides
Types of deal
By relationship and by structure.
By business relationship
- HorizontalBuying a competitor in the same market, for scale, customers or market share. Most likely to draw competition review.
- VerticalBuying a supplier or a customer, to control more of the value chain.
- Adjacent or product extensionBuying a related product to sell to the same customers.
- Market extensionBuying the same kind of business in a new geography.
- ConglomerateBuying an unrelated business, usually for financial reasons.
By structure
| Structure | What the buyer gets | Typical reason |
|---|---|---|
| Share purchase | The company itself, with all its assets and liabilities | Simplest continuity of contracts, licences and staff |
| Asset purchase | Selected assets and agreed liabilities | Leave unwanted liabilities behind; common in small deals and carve-outs |
| Merger by share exchange | Combined company; shareholders swap shares | Combine without cash |
| Carve-out | A division of a larger company | Parent sells a non-core business |
| Majority or minority stake | Control or a partial interest | Growth capital, partial liquidity for founders |
| Management buyout | Existing managers buy the business, usually with financing | Succession |
03 · Guides
Who buys companies
Different buyers, different reasons.
| Buyer | Why they buy | What it means for sellers |
|---|---|---|
| Strategic acquirer | Products, customers, technology or talent that fit their business | May pay for synergies; integration likely |
| Private equity firm | Financial returns over a holding period, often with add-ons | Founders may roll over equity and stay; later exit expected |
| Permanent owner / holding company | Long-term cash flows | Continuity, often autonomy; no planned resale |
| Family office | Long-term investment | Flexible structures, varied speed |
| Independent sponsor or searcher | Deal-by-deal ownership | Financing raised after terms; test certainty of close |
For software, our directory of software company buyers lists active acquirers with stated criteria. For independent sponsors, see how to evaluate an independent sponsor offer.
04 · Guides
How an acquisition works, step by step
The usual sequence for a private deal.
- 01StrategyThe buyer defines what it wants: market, size, capabilities, price range. Sellers decide goals: timing, role, price, structure.
- 02SourcingBuyers find targets through outreach, networks and advisers; sellers run processes or respond to approaches. Many good companies are not for sale until approached.
- 03ValuationUsually a multiple of earnings, revenue or ARR, checked against cash flow. See EBITDA vs net income vs cash flow.
- 04Letter of intentNon-binding outline of price, structure and exclusivity. The LOI value decoder helps compare offers.
- 05Due diligenceThe buyer verifies finances, legal, commercial, technology and people. See the due diligence checklist.
- 06Purchase agreementThe binding contract: price mechanism, warranties, indemnities, protections.
- 07CompletionMoney and ownership change hands. Some deals sign and complete on the same day; others need approvals first.
- 08IntegrationThe buyer combines or supports the business as planned.
The exit simulator lets owners test how timing and structure change the outcome.
05 · Guides
Key terms in plain English
The vocabulary of a deal.
| Term | Meaning | Read more |
|---|---|---|
| Enterprise value | Value of the operating business, before cash and debt | [EV vs equity value](/enterprise-value-vs-equity-value/) |
| Equity value | What shareholders receive after cash, debt and adjustments | [EV vs equity value](/enterprise-value-vs-equity-value/) |
| EBITDA | Operating profit before interest, tax, depreciation and amortisation | [EBITDA guide](/ebitda-vs-net-income-vs-cash-flow/) |
| ARR | Annual recurring revenue from subscriptions | [ARR vs revenue](/arr-vs-revenue/) |
| Earnout | Part of the price paid if targets are met | [Earnout modelling tool](/tools/earnout-modelling-tool/) |
| Seller note | Part of the price lent back to the buyer | [Seller financing](/seller-financing-seller-note-protection/) |
| Locked box | Price fixed on a past balance sheet | [Locked box vs completion accounts](/locked-box-vs-completion-accounts/) |
| W&I insurance | Insurance for breach of the seller's warranties | [W&I vs escrow](/warranty-indemnity-insurance-vs-escrow/) |
| Synergies | Extra value from combining two businesses | [Strategic vs PE premium](/research/strategic-vs-private-equity-buyer-premium/) |
| Transaction costs | Fees, taxes and filing costs of doing a deal | [M&A transaction costs](/ma-transaction-costs/) |
06 · Guides
Approvals and regulation
Some deals need permission first.
Large deals may need merger control clearance from competition authorities before they can complete, such as a premerger filing in the US under the Hart-Scott-Rodino Act or review by the UK Competition and Markets Authority. Deals in sensitive sectors may need foreign investment or national security approval. Regulated businesses such as banks, insurers and telecoms may need regulator consent. Thresholds and procedures differ by country and change over time.
Buyers looking for off-market targets can read how Acquiry approaches acquisitions. Owners thinking about a sale can start with exits.
Reference
Frequently asked questions
What does M&A stand for?
Mergers and acquisitions: the buying, selling and combining of companies or parts of companies.
What is the difference between a merger and an acquisition?
In an acquisition, one company buys control of another. In a merger, two companies combine into one, usually by exchanging shares, and the shareholders of both own the combined company.
What is a merger of equals?
A combination of two companies of similar size with roughly balanced ownership and leadership. Truly equal mergers are uncommon.
What is the difference between a share purchase and an asset purchase?
In a share purchase the buyer acquires the company with all its assets and liabilities. In an asset purchase it buys selected assets and takes on only agreed liabilities.
How long does an acquisition take?
It varies by size and complexity. Small private deals can take a few months from letter of intent to completion; large or regulated deals can take a year or more.
Who buys private companies?
Strategic companies, private equity firms and their portfolio companies, permanent owners and holding companies, family offices, independent sponsors and individual searchers.
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About the analyst
Joash Boyton
Founder and Managing Director, Acquiry · Melbourne, Australia · Global coverage
Joash Boyton is the Founder and Managing Director of Acquiry, an M&A firm built around buy-side acquisition origination. He works with strategic acquirers, private equity firms and advisers supporting buyers on mandates from USD $1M to $500M. Most of the work sits in technology, SaaS, fintech, payments, gaming and digital assets, and it is not limited to them: any sector, any market.