Types of Merger
Horizontal merger takes place between two companies operating under same industry and the companies under merger are most of the times are competitors offering similar goods and services in the market. Such mergers are popular in the industries where only few firms operate and because of high possible gains from synergies, firms decide to merge their businesses.
ii) Vertical Merger:
Vertical Merger is a merger between two companies which are producing different goods and services for the specific finished product. This kind of merger is popular among two firms operating at different level in the industry’s supply chain which merge their operations so as to gain from the synergies created by merging. For Instance, if a merger between car manufacturing company and tire manufacturing company will be a vertical merger.
iii) Conglomerate Merger:
When two companies, operating in two different industries merge their businesses, such merger activity is classified as Conglomerate Merger. For Example, Burger World’s decision to venture into oil exploration business via acquisition represents a conglomerate merger because there are no apparent benefits.
Difference between a merger and joint venture
Although under a merger and joint venture, two or more firms collaborate, but still there are many differences between a merger and a joint venture:
In a merger, when two or more firms merge, then each of them ceases to exist as an independent firm and a new firm is formed. On the contrary, in a joint venture, just as merger a new firm is formed, however firms under the joint venture continue to exist on their own.
A merger is more effective when the two firms decide to fully integrate and perform their business together. On the contrary, in a joint venture, two businesses focuses only on a specific area where the two firms overlap and can work jointly, however, major portion of their core business remains separate.
Kaplan Schweser. (2012). Mergers adn Acquistions. In Schweser Inc, Financial Reporting and Analysis (pp. 337-339). USA.