Difference between Merger and Tender Offer

Organizational management has benefits and drawbacks. A business can choose to fail or thrive on its own, but there are still many things that can be done to ensure the company's continued viability. Possible actions include buying out the current owner, merging with another company, making a tender offer, or even converting to a different type of ownership structure.

Decisions on which strategy to execute depend not only on who owns what inside the firm but also on what kind of returns that strategy may provide. Despite their obvious differences, mergers and tender offers are often used interchangeably.

What is a Merger?

It is the coming together of two or more corporations into a single company operation that is known as a corporate merger. The majority of times, the dominant company will acquire the smaller business in order to complete the merger. It might be accomplished by the acquisition of assets or stock or even through the exchange of assets for newly acquired shares in the company. There are several possible motivations for the formation of mergers, including the following −

  • Eliminating competition

  • Increase the variety of offerings, including items and services

  • Reduce expenditures

  • Utilize the benefits that a company has to offer, such as its financial and technological knowledge.

Forms that mergers can take −

  • Horizontal merger − A horizontal merger takes place when two companies that operate in the same industry and provide the same goods and services combine their operations to form a single entity. They go hand in hand with one another to make use of economies of scale while simultaneously gaining market share.

  • Vertical mergers are a type of merger that occurs in the business world between two or more firms that are located in the same supply chain. The purpose of this is to establish quality control and a reliable route for the flow of information throughout the company.

  • Mergers that extend into adjacent markets are known as market extension mergers. These types of mergers involve firms that compete in the same market but offer distinct goods and services. The market is expanded as a result of this kind of merger, which leads to a larger customer base.

  • Product extension mergers are a type of merger that include two businesses that operate in the same market but sell different kinds of products and services that are connected to one another. This not only increases the customer base but also makes use of the existing distribution channels.

  • Conglomerate mergers are a type of situation in which businesses that provide unrelated services or goods come together to form a single entity. Both of these businesses are active in areas that are unconnected to one another. Therefore, this merger presents a challenge in the form of an abrupt change in the respective company operations.

What is a Tender Offer?

This is an offer made by a corporation that is publicly traded to the shareholders of the company to acquire the company's securities within a specified amount of time. Potential bidders have been extended an invitation to submit a bid during the time that the tender proposals have been made available to them.

The following are some examples of different sorts of tender offers −

  • In the case of mandatory tender offers, the firm that is making an offer is required to make the tender offers for a variety of reasons, including the acquisition of voting rights in AGSs.

  • Offers of tender made by a company on their own initiative are referred to as "voluntary tender offers."

  • Offers of friendly competition This is an offer of friendly competition that has been endorsed and approved by the board of directors.

  • A hostile tender offer is when a decision is made to make tender bids but the board of directors is not informed about it.

  • The purpose of a creeping tender offer is to purchase sufficient shares in the corporation, primarily for the purpose of exercising voting rights.

  • The practice of purchasing firm shares from some owners while excluding other shareholders is known as exclusionary tender, and it is illegal because of this practice.

  • Two-tiered: During the first stage of this tender offer, the firm will get voting rights, and then during the second stage, it will purchase the remaining shares.

  • An offer to shareholders known as a self-tender or buy-back offer is one in which the corporation promises to buy back the shareholders' shares at some point in the future.

  • An offer to acquire only a portion of the company's shares is known as a "partial tender offer."

Similarities − Mergers and Tender Offers

  • In both cases, the decision-making process involves a collaboration between two or more participants.

  • Both parties benefit from a number of advantages, including the division of risks and access to additional financial resources.

Differences − Mergers and Tender Offers

The following table highlights how Mergers are different from Tender Offers −

Characteristics Mergers Tender Offers


A merger is a process of combining two or more companies into a single entity through the formation of a single business organization.

An offer made by a publicly listed corporation to its shareholders to acquire the company's securities within a predetermined amount of time is referred to as a "tender offer."


A new company name could be adopted following the completion of a merger.

It is not possible to purchase a new business name through a tender offer.

Terms of Mergers vs. Tender Offers

The two companies agree to work together amicably going forward after the merger.

It's possible for the terms of a tender offer to be friendly or hostile.


The elimination of competition, diversification of products and services, and a reduction in operating expenditures are the three primary goals of a merger.

The acquisition of premiums from the selling of the offers serves as the primary objective of a tender offer.

New entity

A merger results in the formation of a brand-new business entity

The establishment of a brand-new legal organization is not required in order to make a tender offer.


When two companies combine their operations, their respective owners switch places.

Despite the fact that a tender offer may result in different shareholders, the ownership of the firm would not change.


A tender offer is an offer made by a publicly traded company to the shareholders of a company to purchase the company's securities within a certain period of time, typically over a limited period of time. This is in contrast to a merger, which is a corporate combination of two or more corporations into a single business enterprise whereby a firm is absorbed by the dominant. In most cases, a merger involves a firm being absorbed by the dominant.