Merger: Two companies get together to become one single business entity. By forming so both the companies can derive the combined advantage if using both the company’s resources. For example if a company A is having excellent products but without any distribution network then it will do a world of good for the company to merge with a company which is having excellent distributor network.

Acquisition: Business Firms often buy other business firms when they have the required financial strengths to make useful investments and to reduce competition. They also do this as an attempt to thwart the opposition. In the process of acquiring the acquiring company often by a whole business or a part of the business and most of the acquisitions happen in related industries. Due to this, the buyer can utilize the additional strength of the acquired company to better its position.