News | 03 June 2026
What Are Mergers and Acquisitions (M&A)?
Mergers and acquisitions, commonly referred to as M&A, are among the primary tools companies use for inorganic growth and corporate transformation used by companies to strengthen their competitive positioning, access new markets, or acquire strategic capabilities.
Although the terms “merger” and “acquisition” are often used together, they refer to different types of corporate and financial transactions. In both cases, the objective is generally to create value through operational, financial, or strategic synergies that enable the resulting company to enhance its growth potential, efficiency, and scale.
M&A transactions play a significant role in business expansion, industry consolidation, internationalization, and corporate transformation processes, and are a common component of the strategy of companies across multiple sectors.
Difference Between a Merger and an Acquisition
It is important to distinguish between a merger and an acquisition, as both transactions involve different structures and objectives.
A merger consists of the integration of two or more companies, which may combine into a new entity or integrate through the absorption of one company by another. These transactions typically involve the integration of structures, operations, resources, and teams under a single corporate organization.
An acquisition, on the other hand, occurs when one company obtains full or partial control of another through the purchase of shares, equity interests, or assets. In these transactions, the acquired company may be fully integrated into the acquiring group or continue operating independently as a subsidiary.
Acquisitions may be friendly, when both parties agree to the transaction, or hostile, when the acquiring company seeks to gain control without the support of the target company’s management team or board of directors.
Types of Corporate Mergers
Mergers can be classified according to the relationship between the companies involved and their economic activities.
- Horizontal Merger: A horizontal merger takes place between companies operating in the same industry and competing in the same market. This type of transaction is generally aimed at increasing scale, strengthening competitive positioning, expanding market share, or generating operational efficiencies.
- Vertical Merger: A vertical merger occurs between companies participating in different stages of the same value or supply chain. Its purpose is usually to increase control over production processes, improve operational efficiency, or strengthen access to suppliers and distribution channels.
- Conglomerate Merger: A conglomerate merger takes place between companies operating in unrelated industries. These transactions are generally driven by business diversification and risk diversification strategies.
- Market Extension Merger: A market extension merger occurs when two companies market similar products or services in different geographic markets. This type of merger enables companies to expand their international presence and access new customer bases.
- Product Extension Merger: A product extension merger takes place between companies operating in the same market but offering complementary products or services. The objective is typically to broaden the commercial offering and leverage shared distribution, marketing, or customer knowledge capabilities.
The M&A Process
M&A transactions are typically carried out through a complex process that combines strategic analysis, negotiation, financial structuring, and legal execution.
The process begins with the definition of the strategic objectives of the transaction and the identification of potential target companies aligned with the acquiring company’s growth, expansion, or transformation priorities.
This is followed by a preliminary analysis of the target company and a due diligence phase, during which financial, legal, tax, regulatory, operational, and employment-related aspects that may affect the transaction are thoroughly assessed.
Once this analysis has been completed, the target company is valued and the main economic and contractual terms of the transaction are negotiated. In parallel, the financing structure is defined and the legal agreements required to execute the transaction are prepared, together with any necessary regulatory approvals.
Following the signing and closing of the transaction, one of the most important and complex stages of the process begins: post-merger or post-acquisition integration. This phase includes the integration of operations, teams, systems, processes, and corporate cultures, and is critical to capturing the expected synergies and achieving the strategic objectives of the transaction.
Benefits and Strategic Objectives of M&A Transactions
Companies pursue M&A transactions for a range of strategic, financial, and operational reasons.
One of the main objectives is the generation of synergies, meaning the creation of additional value resulting from the combination of business capabilities, resources, or structures. These synergies may translate into operational efficiencies, cost optimization, revenue growth, or enhanced strategic capabilities.
M&A transactions also enable companies to accelerate business growth compared to traditional organic growth. Through an acquisition or merger, a company can gain faster access to new markets, technologies, production capabilities, specialized talent, or intellectual property.
In certain industries, these transactions also respond to business consolidation processes aimed at increasing scale, strengthening competitive positioning, or adapting to structural market changes.
However, the success of an M&A transaction depends on multiple factors, including the accurate valuation of the target company, appropriate financial structuring, effective management of regulatory risks, and the ability to efficiently integrate the organizations involved.
How M&A Transactions Are Financed
The financing structure is one of the most important elements of any M&A transaction and may vary depending on the size of the deal, the risk profile, and the financial strategy of the acquiring company.
One of the most common alternatives is the use of equity or available cash reserves. Although this option avoids increasing leverage, it may affect the company’s liquidity position.
Another possibility is to finance the transaction through a share exchange or share issuance, allowing the target company’s shareholders to participate in the equity of the resulting entity.
Acquisitions may also be financed through debt, including bank loans, syndicated financing, bond issuances, or other acquisition finance structures. This type of financing enables companies to execute large transactions without fully consuming their own resources, although it increases financial leverage.
In practice, many transactions use hybrid structures combining cash, debt, and shares to balance financial flexibility, cost of capital, and risk levels.
BBVA CIB supports companies and institutions in mergers and acquisitions transactions through specialized advisory, structuring, and corporate financing capabilities.
Leveraging its sector expertise, international market knowledge, and global Corporate & Investment Banking capabilities, BBVA CIB provides support in acquisition, divestment, integration, and corporate growth processes, tailoring each transaction to its clients’ strategic and financial objectives.