Types of Mergers
15, Apr 2022
Hey there! Welcome back again. In the previous blog, we discussed what are mergers and acquisitions. In this blog, we will be covering the types of mergers. Did you know that the term chosen to describe a merger may depend on the economic function, the purpose behind the business transaction, and the relationship among the merging companies? Let us now see the various types of mergers.
The types of mergers are namely
- Horizontal mergers
- Vertical mergers
- Conglomerate mergers
- Market Extension mergers
- Product or Congeneric Extension mergers
- Accretive mergers
- Horizontal Merger:
- Horizontal merger is one type of merger that operates between two or more companies that are offering similar products or services.
- These organizations usually work within the same space or industry. Such mergers are more common in industries that have fewer enterprises offering the same product.
- Let us understand better with the help of an example, a merger between Coca-Cola and Pepsi would be horizontal. The nature of the business operations can be very similar.
- Plenty of opportunities can be availed by pooling the resources that help in increasing the manufacturing of units and reducing the costs.
- Vertical Merger:
- Vertical merger is another common type of merger. Vertical mergers are simple but very common.
- The main reason behind such mergers is to increase the synergies that are created by merging firms that would result in being more efficient by operating as one.
- To summarize, in simple words, a vertical merger joins two companies that may not be direct competitors but exist under the same supply chain.
- A classic example that can be given would be eBay and PayPal. As we all know, eBay is an online shopping and auction platform, whereas PayPal provides services to ease the transfer of money, enabling users to make online payments.
- Though the services offered by both are quite different, a merger helped eBay in increasing the number of transactions which indeed proved to be a great strategic decision overall.
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Feel free to reach our counsellors if you have any further doubts or queries. All the best and happy learning.
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