DEFINITION of 'Merger Of Equals'

The combination of two firms of about the same size to form a single company. In a merger of equals, shareholders from both firms surrender their shares and receive securities issued by the new company.

BREAKING DOWN 'Merger Of Equals'

A merger of equals is the most accurate definition of a merger. Most merger activity, even friendly takeovers, sees one company acquire another. When one company is an acquirer, it is proper to call the transaction an acquisition. Because one company is the purchaser and the other is for sale, such a transaction cannot be viewed as a merger of equals.

For example, the creation of DaimlerChrysler saw both Daimler-Benz and Chrysler cease to exist. Because neither firm acquired the other and a new company was formed, this is considered a merger of equals.

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