A buyout occurs when an investor, company, or group acquires a controlling stake in another business, often taking full ownership. The buyer may use cash, debt, or equity to purchase the target company’s shares or assets. Common buyout types include leveraged buyouts (LBOs), where debt finances most of the acquisition, and management buyouts (MBOs), where the existing leadership team purchases the business.

In contrast, a merger involves two companies combining to form a new entity, typically through mutual agreement. Mergers are usually structured as a merger of equals, with shared control and integration of operations, assets, and management.

Key Differences:
Control & Ownership: A buyout results in one party gaining control, while a merger blends two firms under shared ownership.

Financing: Buyouts often rely on external funding (e.g., private equity or debt), whereas mergers use stock swaps or joint equity.

Purpose: Buyouts aim to privatise, restructure, or resell a company for profit, while mergers focus on synergies, growth, or market expansion.

Outcome: Post-buyout, the target may operate independently or undergo changes; post-merger, the two companies fully integrate.

While both strategies reshape corporate landscapes, buyouts emphasise ownership transfer, whereas mergers prioritise collaboration.