Mergers1. Horizontal Show
A horizontal merger is when two companies in similar industries merge to enhance their market reach. For example, the merge of Facebook, WhatsApp, Instagram and Messenger. All of these companies operated in a similar space, but combined Facebook was able to increase it’s standing in the social media industry . 2. Vertical A vertical merger is when two companies that exist in the same supply chain at different production stages merge. An example of this is the 2002 vertical merger between eBay and Paypal – this merger enabled eBay streamline purchases made on it’s website. 3. Conglomerate A conglomerate merger is essentially any merger that falls outside of the description of horizonal and vertical. These types of mergers are usually done to diversify a company’s assets and generally happen with companies of different industries and regions. There are a number of examples of Conglomerate mergers – Amazon is known for being an online marketplace but this billion dollar company owns over 40 subsidiaries which don’t relate to this such as Whole Foods, Goodreads, IMDB and diapers.com to name a few. What are the benefits of merging or acquiring companies?If done correctly, mergers and acquisitions can open a number of doors for your company. Here are a few benefits: 1. Increased growth Building and growing your business organically can be a long journey, but an M&A could provide a faster route to growth and revenue growth. If done right, by merging or acquiring another company you can combine your resources and market reach to target a whole new arena of potential customers. 2. The combined value and performance of two companies Many mergers and acquisitions happen with the aim of combining two companies’ value and performance through the possibilities of cost reduction and higher combined revenue. Together the hope is the company will be worth more than as individual companies. 3. Greater market share By gaining greater market share as a combined force, the new entity will have more power over it’s supply chain and be able to increase their influence over price. 4. Diversification A merger and acquisition can help companies diversify their portfolio and place them in a better position to deal with any possible losses in their industry. By acquiring another company in a different industry, a company will be able to reduce market risk. 5. Tax benefits Whilst this is not a sole reason for companies to go through an M&A, there are tax benefits if a company acquires another with significant losses. If a company does this, they can use the target company’s losses to lower their tax bill. In this section, we look at the most common types of mergers and acquisitions. We also explore some of the pros and cons of each, and help you establish which one might be best suited for executing your own business strategy. Transform your M&A experience with Ansarada Deals™—start your free trial today!What are the most common types of mergers and acquisitions?
Horizontal mergerA horizontal merger occurs when two companies operating in the same market (and selling similar products or services) come together to dominate market share. This type is attractive for merging companies aiming to build economies of scale and decrease market competition. However, there are potential downsides. A horizontal merger comes with increased regulatory scrutiny and stringency, and can lead to a loss of value if the post-merger integration is not fully realized. Regulatory due diligence should be executed with extra special care. Vertical mergerVertical mergers involve two companies in the same industry who operate in different stages of production. This could involve a retailer who merges with a wholesaler, or a wholesaler merging with a manufacturer, for example. This type of merger is ideal for streamlining operations, boosting efficiencies, and cutting costs across the supply chain, but it can also reduce flexibility and result in new complexities for the business to manage. Congeneric merger (also ‘Concentric merger’)In a congeneric merger, the acquirer and target company have different products or services, but operate within the same market and sell to the same customers. They could be indirect competitors, although their products often complement each other. As these companies already share similar distribution channels, production or technology, this type of merger can allow the new business entity to expand its product lines and increase market share. As a downside, the fact that these two companies already operate within the same industry could limit further diversification. Market-extension and product-extension mergersA market extension merger describes two companies in the same industry who join forces with the aim of expanding market reach. Commonly, this type of transaction occurs across multiple geographic regions. A product extension merger occurs when a specific product is added to the product line of the acquirer from the acquired company. Conglomerate mergerUnlike the other types of merger, a conglomerate merger occurs between two companies whose business activities and industries may be completely unrelated. In pure conglomerate mergers, the two firms may continue to operate separately within their own markets, whereas in a mixed one, they may look to expand product or market reach. While this type of merger can help the new entity increase market share and diversify its business, it can be especially challenging to integrate dissimilar companies, raising the risk of culture clashes and lost efficiency due to disrupted business operations. How can you tell which type of merger is right for you?The right type of merger for you will ultimately depend on your goals and your M&A strategy. Are you looking to boost market share and decrease your competition? Then a horizontal merger is probably your best option. Are you looking to streamline your operations and create new efficiencies by integrating with suppliers or wholesalers? A vertical merger will help you achieve this. Understanding which type of merger or acquisition will best support your strategy requires a careful look at the pros and cons of each, and the support of an expert advisor for guidance before the companies join together. Preparing for an acquisition?Discover how much easier it can be with Ansarada Deals - try for free today. Try now for free What is a merger of two firms?A merger takes place when two companies combine to form a new company. Companies merge to reduce competition, increase market share, introduce new products or services, improve operations, and, ultimately, drive more revenue.
What type of merger joins two businesses in the same market?A product-extension merger is a merger between companies that sell related products or services and that operate in the same market. By employing a product-extension merger, the merged company is able to group their products together and gain access to more consumers.
What are the stages of a merger?The merger & acquisition process is very complex, yet can be broken down into four phases: due diligence, agreement, integration, and value attainment.
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A ___________________ merger joins two firms operating in different stages of business.
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