An acquisition involves one firm buying only a portion of another firm. The acquisition may happen to acquire assets or an altogether different segment of the other firm. A merger involves the total absorption of a target firm by the acquirer. As a result, one firm ceases to exist and only the new firm (acquirer) remains.

In a merger or acquisition transaction, valuation is essentially the price that one party will pay for the other, or the value that one side will give up making the transaction work. Valuations can be made via appraisals or the price of the firm’s stock if it is a public company, but at the end of the day valuation is often a negotiated number.