The 4 Types of Merger

This is a transaction in which the ownership of business, organizations, companies, or the operating units are transferred or consolidated with other entities.

A merger combines two separate businesses into a new single legal entity. It is uncommon for two equal companies to both benefit from combining their resources, including staff, and top management.

An acquisition, however, does not result in the formation of a new entity. (Company)

There are different types of mergers mainly:

A conglomerate merger:

• This is a merger between two companies who offer different products or services

A horizontal merger:

• This is the amalgamation of two companies with similar products

A concentric merger:

• This is the coming together (merger) of two companies with similar clientele but with different products

A vertical Merger:

• This is the coming together of two companies to consolidate the line of supply of a product.

A merger or an acquisition is when two companies come together as one and they take advantage of synergies. This normally happens when two companies buy out each other’s stock. This is done to expand the companies market share, reduce the risk and diversify products, competition and increase profits. Most common type of company merges include horizontal, vertical, conglomerates, market, and product extensions.

The vertical merger is simple and is the most common one. This combines two companies that supply similar goods or services, to combine a different supply chain functions that both companies operate with.

A merger unites two companies into one under an agreement. There are a number of reasons for merging two companies. This is normally done to expand into new segments of the market, gain market share or maybe just to expand the companies reach.

To do this successfully there are several steps to follow:

• Plan your due diligence thoroughly and execute it carefully
• Plan and execute the integration carefully
• Create a transition team
• Have clear goals set
• Make sure management and staff are aware of what is happening
• Check your financial status.

Hereunder are some guidelines for a merger for small businesses

• Compare your company structure to the other company
• Set up goals and leadership on the merger on the outset
• Carefully compare your company culture to the other company.
• Have a set of operating cost with projections
• Do a thorough due diligence
• Check financial position for both companies.