Vertical Merger Research Paper

Mergers and takeovers are forms of external growth within a business. External growth occurs when one firm decides to expand by joining together with another. A takeover specifically refers to the gaining control of a firm by acquiring a controlling interest in its shares (51%). Merger, on the other hand, means the joining with another firm to form a new combined enterprise, shares in each firm are exchanged for shares in the other.

When companies combine/merge the whole objective is to gain new opportunities, gain market share, grow the business, to become more innovative and to improve product offerings, utilizing/sharing the existing resources and data. From the case

The second type of combination is consolidation which takes place when a new corporation is created to absorb the operations of two or more existing corporations. The shares of the existing companies are retired, and the shares of the newly formed company will be allocated to those shareholders accordingly. Only the new corporation continues to exist as a legal entity.

Horizontal mergers take place between companies in the same industry. These companies are rivals who sell the same goods or services. When a merger takes place, a rival is eliminated and potential for gains become higher. A vertical merger is one in which a firm or company combines with a supplier or distributor. For example, if a car making firm is receiving chassis from two suppliers and decides to acquire them, it is a vertical merger. On the other hand conglomerate mergers are those between firms that

A horizontal merger is a merger between companies which operate in the same business field and they share the same product lines as well as markets. The obvious result of this deal is the expansion in market share, reduction in fixed costs and increase the efficiency of distribution channel and logistics. Usually, horizontal mergers are common in the industries where competition is intensive and the potential gains of market share are

Conglomerate Merger - is the merger of firms in unrelated industries. If Coca-Cola mergers with a movie producer, that would be a Conglomerate Merger.

Mergers and acquisitions can be classified in terms of the direction of the growth. A horizontal merger/takeover is the combining of two firms in the same stage of production, for example Well come Pharmaceuticals merged with Glaxo Pharmaceuticals. This sort of integration takes place to combat competition from the market and secure market domination; to reduce risks and increase financial strength; and to compete in

Conglomerate mergers involve firms that operate in different product markets, without a vertical relationship. They may be product extension mergers, i.e. mergers between firms that produce different but related products or pure conglomerate mergers. Conglomerate mergers generally involve the union of two companies that have no type of common interest, are not in competition with any of the same competitors, and do not make use of the same suppliers or vendors. Essentially, the conglomerate merger usually brings together two companies with no connections whatsoever under one corporate umbrella. This type of arrangement can be very desirable when the investors for the newly created conglomerate wish to create a strong presence in two different markets. In practice, the focus is on mergers between companies that are active in related or neighboring markets, e.g., mergers involving suppliers of complementary products or of products belonging to a range of products that is generally sold to the same set of customers in a manner that lessens competition. Proponents of conglomerate theories of harm argue that in a small number of cases, where the parties to the

Why companies consider merger to be important for their business success is not far fetch, to increase market share, economies of scale, profit from R&D, benefits on account of tax shields and reduction of competition. However, the merger also has some associated problems such as increased business complexity, clash of corporate culture and sometime employee may be resistance to

The mix of at least two organizations into another organization, where every one of the organizations lose their character is named as a merger through consolidation.Here, the gained organization exchanges its advantages, liabilities and shares to the procuring organization in return of money or shares.

According to Jimmy, 2008; Alao 2010 the term Merger, “refer to the combination of two or more organizations into one larger organization. Such actions are commonly voluntary and often result in a new organizational name (often combining the names of the

A merger occurs when two firms come together or join together in order to share resources of the two organisations. A merger helps enhance the two organisations which have joined to share resources and management skills for the benefit of both organisations which now work under one management structure. On the other hand take-overs include acquisitions of a firm by another. In this case the one company that has

Today’s business world hosts a phenomenon, a way to expand business activities by consolidating or buying another company, so called Mergers or Acquisitions (M&A’s). M&A’s is a corporate strategy that was introduced in the 1960s. It has experienced ‘waves’ of popularity and success while at the same time suffered criticism due to numerous failures. In today 's global, competitive environment, mergers are sometimes the only means for long-term survival. Mergers can be categorized as either horizontal, vertical or conglomerate. They also exhibit other characteristics, for example, they can be complimentary or supplementary in nature.

Absorption, the other type of merger, is nothing but dissolution of a company’s identity into other company’s identity. As the name suggest, in absorption a company absorbs other company to form a new larger entity.

In simple terms, a merger may be regarded as the fusion or absorption of one thing or right into another. A merger has been defined as an arrangement whereby the assets, liabilities and businesses of two (or more) companies become