What is the difference between Merger and Consolidation?

Merger and Consolidation are the two most commonly used terms in the business world. Some people still do not know that merger and consolidation are not the same. Although, both terms explain the decision of two or more companies or business entities coming together to become one. There are so many factors that can influence the decision of a company to form an alliance with another company. Examples of those factors are economic challenge, diversification, also two companies can decide to become one so as to put an end to any form of unhealthy competition between them.

Merger simply means, the coming together of two or more business entities to become one. Whenever a merger happens, one out of many companies coming together will be allowed to take over the other company/companies. Consolidation, on the other hand, has almost the same meaning as a merger, however, in the case of a consolidation, the two or more companies coming together are turning into a new business entity.