Types of Mergers Business
It is a merger between two or more companies carrying out unrelated business activities. Companies can operate in different industries or in different geographic regions. A pure conglomerate involves two companies that have nothing in common. A mixed conglomerate, on the other hand, takes place between organizations that operate in independent business activities, but are actually trying to achieve product or market expansions through fusion. While the companies to be merged generally have the same positions, the types of mergers are classified as one of the following, each of which is discussed in more detail below with specific merger examples for each type: Buyers in a merger are usually looking for some form of growth or business opportunity. Often, companies join forces to create synergies when the combined company is capable of more than the individual companies from which it was formed would have continued to work separately. Companies can also opt for a merger to achieve the following objectives: The three main types of mergers are horizontal mergers that increase market share, vertical mergers that leverage existing synergies, and concentric mergers that expand the product offering. In order to simplify the procedure when there are no or almost no minority shareholders, the statutes of the economic company approve a so-called abridged merger. In general, only mergers in which a parent company holds at least 90% of each class of voting shares of a subsidiary can be carried out under the abridged procedure. Only a few articles of association provide for abridged mergers in which companies without legal capacity are involved. A horizontal merger takes place between companies operating in the same sector.
The merger is usually part of the consolidation between two or more competitors offering the same products or services. Such mergers are common in industries with fewer firms, and the goal is to create a larger firm with greater market share and economies of scale, as competition between fewer firms tends to be higher. The merger of Daimler-Benz and Chrysler in 1998 is considered a horizontal merger. When two companies produce parts or services for a product merger, the union is called a vertical merger. A vertical merger occurs when two companies operating at different levels of the supply chain in the same industry pool their activities. These mergers are carried out in order to increase the synergies obtained through the reduction of costs resulting from the merger with one or more supplier companies. One of the best-known examples of a vertical merger took place in 2000, when Internet service provider America Online (AOL) merged with media conglomerate Time Warner. Mergers are most often carried out to gain market share, reduce operating costs, expand into new territories, unite common products, increase sales and increase profits – all this should benefit corporate shareholders.
Following a merger, the shares of the new company will be distributed to the existing shareholders of the two parent companies. If your company is in the market for a merger, it is important that you work with a competent M&A lawyer. A lawyer with many years of experience in mergers and acquisitions can advise you on the best types of mergers and formal merger structures for your specific situation. For many company buyers and sellers, that lawyer is Xavier W. Staggs at Jenkins Fenstermaker, PLLC. As an M&A lawyer and business owner, Xavier has the experience and understanding of M&A law and current market trends that businesses need. Contact them today by calling (304) 523-2100 or by filling out the company`s online contact form. Companies will continue to look for acquisition candidates, but the fundamental business case for the merger must be strong. So what should companies look for to identify mergers with a better chance than even good development? A merger between companies in the same sector. Horizontal merger is a corporate consolidation that takes place between companies operating in the same space, often as competitors offering the same good or service. Horizontal mergers are common in industries with fewer firms because competition tends to be stronger and the synergies and potential market share gains for mergers of firms in such an industry are much greater. Would you like to go through the different types of mergers? Check out our handy chart to quickly discover the differences between each type of merge.
There are different types of mergers, depending on the purpose of the companies involved. Below are some of the most common types of mergers. In the event of a merger, the target company merges with the acquirer in a transaction carried out in accordance with the general articles of association of the merger. This type of merger is general in that it is not specific and can potentially apply to all mergers. Small companies conduct mergers and acquisitions for the same reasons as large companies: to strengthen their positions in one or more markets, to access new markets, to increase their efficiency or simply to diversify a company`s offer. .