In the cases of both mergers and acquisitions, two companies combine through a purchase agreement. The terms acquisition and merger are usually considered synonymous with each other, but there are slight differences between the two.
In the case of an acquisition, when the two companies combine, the stronger corporation takes over the second corporation completely. By definition, a merger is when two companies of about the same size combine and agree to move forward as a single company. In reality, however, a “merger of equals” does not happen very often.
The differences between mergers and acquisitions mostly have to do with whether the “smaller” company is friendly or hostile towards the combination. Mergers are considered to be friendly, while acquisitions carry a hostile connotation to them.
Most mergers are actually acquisitions, but the companies will call them mergers as part of the business purchase agreement. When both CEOs agree that joining together is in the best interest of their companies, then it is called a merger. However, if the deal becomes unfriendly and the smaller company does not want to be purchased, it becomes an acquisition.