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. This results in 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. A 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.