Suppose Firm A acquires Firm B in a merger. Further, suppose Firm B’s shareholders are given one share of Firm A’s stock in exchange for two shares of Firm B’s stock. From a legal standpoint, Firm A’s shareholders are not directly affected by the merger. However, Firm B’s shares cease to exist. In a consolidation, the shareholders of Firm A and Firm B exchange their shares for shares of a new firm.