There are so many ways to be profitable and productive in the business industry, but you can compare just a few of the results you can enjoy from corporate mergers. Unfortunately, this phenomenon is known to only a few, especially seasoned business people. You may have some challenges understanding this subject as a newbie. Still, the information in this piece offers a clear guide to what these mergers are, how they differ from acquisitions and the different types of business mergers.
What are Corporate Mergers?
In business terms, merging refers to when two companies combine their operations to become one. The involved parties voluntarily agree to become one entity legally. Nonetheless, the parties must ensure their companies have similar value, size, and client-based profiles. This’s what’s known as a ‘merger of equals.’ The merging companies enjoy several benefits, including;
- An increased clientele
- Minimized production expenses
- Expansion and access to more extensive and newer markets
- Increased profits
- Consolidating the manufacture of similar goods or services
A merger differs from an acquisition because the latter involves one company purchasing and making the merged organization part of it. This means the relationship between the buyer and the seller is less mutually beneficial than that of a business merging deal.
Types of Corporate Mergers
Market Extension
These are corporate mergers involving two companies selling similar products in different markets. The primary basis of an extension merger is allowing the involved parties access to a more extensive market share and a more significant clientele.
Conglomerate
Unlike a market extension, conglomerate corporate merger happens between companies that offer different products on the market. An example is a merger between companies in varying industries or locations.
Horizontal
This is a merger between competitors who individually and willingly agree to join forces. It’s similar to market extension in that the parties deal with similar products.
Vertical
Vertical corporate mergers happen between two businesses operating at different production chain stages, primarily producing different products that lead to a finished product.
Product Extension
This merger entails the merged company manufacturing the products from the original organization.
Business mergers have existed for a while, but only some understand what they’re all about. Point High Finance is an organization you can rely on for all the information about this subject. Contact our offices today.
