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

The distinction between a merger and an acquisition primarily lies in the way these two processes are structured and how the companies involved interact. In a merger, two companies come together to form a new legal entity; this means that both organizations agree to combine resources, assets, and operations into a single new company, often sharing leadership and operational responsibilities. The essence of this collaboration is typically based on a mutual agreement that emphasizes collaboration and synergy.

In contrast, an acquisition is characterized by one company purchasing another. In this case, the acquired company loses its independent status because it is absorbed into the acquiring company, which retains its own identity. The acquiring company takes control over the operations, assets, and liabilities of the acquired entity, emphasizing a more unilateral decision-making process without the same degree of partnership implied in a merger.

The other options suggest scenarios or rules that don't accurately reflect the core definitions of mergers versus acquisitions. Mergers can happen with both public and private companies, government approval is not inherently required for either process in all cases, and there is no standard that defines mergers as temporary. Understanding these distinctions is crucial for comprehending corporate strategies and governance in business contexts.