Corporate mergers can be complete or partial and include vertical, horizontal, conglomerate, market extension, and product extension mergers. Vertical mergers involve a business merging with a supplier or customer, while horizontal mergers involve direct competition. Conglomerate mergers involve merging with a company in a different market, market extension mergers involve companies in the same market but not direct competition, and product extension mergers involve companies selling related products in the same market.
Corporate mergers are a term used to describe the combination of two companies. The different types of mergers include: vertical mergers, horizontal mergers, conglomerate mergers, market extension mergers, and product extension mergers. This can be a complete merger where all aspects of the two companies are combined or a partial merger where only certain parts or liabilities are one.
A vertical merge is one of the most common types of merge. When a business merges with a supplier or customer to create a supply chain extension, it is referred to as a vertical merger or integration. An example of a vertical merger would be a steel company merging with an automobile manufacturer. The steel company was formerly a supplier to the automaker, but would become part of the same company after the merger.
Horizontal mergers are types of mergers involving companies in direct competition with each other. Often horizontal mergers are considered hostile, meaning that a larger company “takes control” of a smaller one in more of an acquisition than a merger. An example of a horizontal merger in the traditional sense is the combination of the automakers Chrysler and Daimler Benz. Both companies wanted to merge and were called Daimler Chrysler when combined. In the Daimler Chrysler case, there was a synergy in market share, financial obligations, and operating costs that made the resulting company better than the two companies separately.
Conglomerate mergers are types of mergers that are in different market assets. There is no relationship between the type of business one company is in and the type of business the other is in. A merger is typically part of a company’s desire to grow its financial assets. By merging with a completely independent, but often equally profitable company, the resulting conglomerate earns a revenue stream across many types of industries.
Market extension is similar to horizontal mergers in that the merging companies produce the same types of products. The difference, however, is that the companies are not in direct competition with each other. Instead, they compete in different markets, such as one company based in North America and selling only in the United States and another based in Asia and selling only in China. With the merger, the combined company will have greater access to sales as a whole and will also be able to achieve synergies through combined manufacturing or R&D.
Product extension mergers are types of mergers that bring together companies that sell related products in the same market. An example of this would be a snow ski manufacturer merging with a ski apparel company. Both companies sell to the snow skier market but by combining their products, the offering is extended.
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