Companies merge in order to achieve a variety of different results. Depending on the end goal, there are several different ways to categorize a merger.
There are five main types of mergers. One type, conglomerate mergers, can further be described as pure or mixed. Pure conglomerate mergers are those occurring between two companies whose business activities have nothing in common with one another while mixed ones are those in which companies that have little in common are seeking a product or market extension.
Horizontal mergers occur when two businesses in the same industry come together. Often, horizontal mergers occur in industries with few firms offering the same services or goods. Mergers between companies who operate in different markets but offer the same products or services are called market extension mergers while mergers between companies that offer similar goods in the same market are called product extension mergers. Finally, when two companies who both operate at different levels required to produce a finished product merge, it is called a vertical merger. Examples would include two companies who produce different products that are used in order to make a finished product.
Mergers are used to achieve various business goals, whether the goal is to extend market share, products, increase profits or streamline business. When a company is considering a merger, it is important to think about what the desired result of the merger is. When businesses make smart decisions regarding mergers, they can potentially increase profits and expand their reach. A business may benefit by consulting with a business and commercial law attorney who helps with mergers and acquisitions as such agreements can have long-reaching effects on the business’s ultimate success. Business law attorneys may be able to help their clients evaluate their goals and choose they type of merger that might be best for them.
Source: U.S. Department of Commerce, “5 Types of Company Mergers”, November 14, 2014