What Is The Difference Between Mergers, Acquisitions, And Joint Ventures?

Mergers And Acquisitions Newsletter™

A merger is when 2 companies combine into a new company, Newco, usually on a valuation based on an exchange ratio. Company A is valued at 1 and Company B is valued at 2, so A shareholders get 1/3 of the shares in Newco and B shareholder get 2/3 of the shares.

An acquisition entails buying the shares or assets of another company.

A joint venture is typically project based where 2 companies dedicate resources, e.g. $, personnel, marketing. A joint venture should have a set time limit and a way to exit for both parties if it is not working. Joint ventures can lead to mergers or acquisitions as both parties prove value to each other over time.

Very simplistically, a merger is when two companies combine into one. A joint venture is when two companies work together and share ownership of a project. Possibly (and commonly), they form a third company which they each own part of. An Acquisition entails buying the shares or assets of another business.

Hope this helps to fully understand the difference between these 3!

Sebastian Amieva

Mergers And Acquisitions Newsletter™