Horizontal vertical and conglomerate mergers

Conglomerate Mergers 1 — Horizontal Mergers Horizontal mergers happen when one company merges or takes over another company that has similar products and services, which means that both the companies are in the same industry. In this case, mostly the companies are direct competitors.

Horizontal vertical and conglomerate mergers

Most mergers are simply done when one firm takeover another firm, but there are different strategic reasons behind this decision. In the same way, legal terminology also differs from merger to merger, hence it is important to differentiate and understand the subtle differences.

Acquisitions A merger takes place when two companies combine together as equals to form an entirely new company. Mergers are rare, since most often companies are acquired by other companies, and it is more of absorption of operation of the target company.

Mergers and acquisition are a means to a long-term business strategy. New alliances, mergers or takeovers are usually based on company vision and mission statements, and they have to truly reflect company corporate strategy in terms of what it wants to achieve with the strategic move in the industry.

The process of acquisition or a merger calls for a disciplined approach by the decision makers at the company. Three important considerations should be taken into account: Company must be willing to take risk, and make investment early-on to benefit fully from the merger, competitors and the industry takes heed and start to merger or acquirer themselves.

In order to reduce and diversify risk, multiple bets must be made, since some of the initiatives will fail, while some will prove fruitful.

Horizontal Mergers Product extension merger Market extension merger Which term is used to describe any merger depends on the purpose of the transaction, and the end relationship between the companies. Conglomerate Merger Conglomerate mergers involve the combination of corporations involved in business activities that are completely unrelated.

The management of the acquiring firm must learn to be resilient, patient and able to emulate change owing to ever-changing business dynamics in the industry.

Horizontal Mergers Horizontal mergers happen when a company merges or takes over another company that offers the same or similar product lines and services to the final consumers, which means that it is in the same industry and at the same stage of production.

Companies, in this case, are usually direct competitors. For example, if a company producing cell phones merges with another company in the industry that produces cell phones, this would be termed as horizontal merger.

The growth of firms

The benefit of this kind of merger is that it eliminates competition, which helps the company to increase its market share, revenues and profits.

Moreover, it also offers economies of scale due to increase in size as average cost decline due to higher production volume. These kinds of merger also encourage cost efficiency, since redundant and wasteful activities are removed from the operations i. Vertical Mergers A vertical merger is done with an aim to combine two companies that are in the same value chain of producing the same good and service, but the only difference is the stage of production at which they are operating.

For example, if a clothing store takes over a textile factory, this would be termed as vertical merger, since the industry is same, i. These kinds of merger are usually undertaken to secure supply of essential goods, and avoid disruption in supply, since in the case of our example, the clothing store would be rest assured that clothes will be provided by the textile factory.

Horizontal vertical and conglomerate mergers

It is also done to restrict supply to competitors, hence a greater market share, revenues and profits. Their products may be complements, product which go together, but technically not the same products.

For example, if a company that produces DVDs mergers with a company that produces DVD players, this would be termed as concentric merger, since DVD players and DVDs are complements products, which are usually purchased together.

These are usually undertaken to facilitate consumers, since it would be easier to sell these products together. Also, this would help the company diversify, hence higher profits. Selling one of the products will also encourage the sale of the other, hence more revenues for the company if it manages to increase the sale of one of its product.

This would enable business to offer one-stop shopping, and therefore, convenience for consumers.

What Is a Horizontal Merger and a Vertical Merger? | initiativeblog.com

The two companies in this case are associated in some way or the other. Usually they have the production process, business markets or the basic technology in common.

It also includes extension of certain product lines. These kinds of mergers offer opportunities for businesses to venture into other areas of the industry reduce risk and provide access to resources and markets unavailable previously.

Conglomerate Merger When two companies that operates in completely different industry, regardless of the stage of production, a merger between both companies is known as conglomerate merger. This is usually done to diversify into other industries, which helps reduce risks. All the successful mergers and acquisitions have a specific, well thought-out logic behind the strategic move.

Mergers and acquisitions usually create value for the company in different ways, some of which are listed below: If another company is taken over, its performance can be radically improves, due to economies of scale.What Are The Differences Among Horizontal Vertical And Conglomerate Mergers.

Mergers occur when one business firm buys or acquires another business firm (the acquired firm) and the combined firm maintains the identity of the acquiring firm.

Business firms merge for a variety of reasons, both financial and non-financial. Mergers are generally classified according to whether they are horizontal, vertical, or conglomerate.

A Horizontal merger is a combination of two or more companies that compete directly with one another. Vertical and conglomerate mergers are both non-horizontal and are both usually analysed by considering the potential foreclosure of rivals under a structure of ability, incentive, and effect.

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There. Mergers One of the hottest topics in the business press are rumors of major corporations merging together. Just as the entertainment press likes to report on rumors of celebrities who are dating, the business press likes to speculate about “corporate match-making”.

There are three types of mergers, horizontal, vertical, and conglomerate. Horizontal mergers take place in firms that are large and are complementary to the current business.

Pooling complimentary resources will not only ensure that there is no overlap and related inefficiencies between the merged operations, but also help companies harness the.

There are three basic kinds of mergers — horizontal, vertical, and conglomerate, referring to the business relationship between the two parties. Understanding the different kinds of mergers gives you insight into the motivations behind mergers.

Companies That Did a Conglomerate Merger | Bizfluent