Question 12.RQ.1: Distinguish between a merger and a takeover.

A merger involves a combination of two (or more) businesses of roughly equal size. The combination involves the creation of a new business and does not involve the purchase of the shares of one of the existing businesses by the other business. The merger is undertaken with the agreement of the managers and shareholders of each business and there is continuity of ownership of the resources. A takeover involves one business acquiring the shares of another business in order to gain control of the resources of that business. This may lead to a change of ownership and the takeover may be resisted by the managers of the target business.