What does a merger involve?

A merger specifically refers to the combination of two or more companies to create a new entity. This process typically involves the merging of assets, liabilities, and operations of the involved companies, ultimately resulting in a single organization that can leverage the strengths of each original company. For instance, in a merger, both companies might share resources, staff, and technologies, leading to operational efficiencies and market advantages.

In contrast, an acquisition refers to one company purchasing another, where the acquired company is absorbed into the purchasing entity rather than forming a new organization. Selling off a division of a company pertains to divestiture rather than merger activity, as it involves a single entity reducing its scope by disposing of parts of its business. Finally, creating a new business from scratch describes entrepreneurship rather than a merger, as it does not involve existing companies combining their operations. Understanding these distinctions highlights why the combination of two or more companies into a new entity is fundamentally what defines a merger.