A combination of two or more companies into one entity where the assets and liabilities of the selling company are absorbed by the buying company. Although the combined company may be considerably different from the pre-merger companies, it often retains it original legal identity and core operations. The amount paid over and above the book value of the acquired company would be reported in the books of the acquirer as goodwill. In cases a transaction takes place through the purchase of assets or stock using cash or a debt instrument for payment, the merger is often treated as a taxable capital gain to the selling company or its stockholders.

Mergers can be classified as horizontal mergers, vertical mergers, market extension mergers, product extension mergers, and conglomerate mergers.