Mergers are processes in which two companies unite to become a third legal entity. They can be of 5 different types. See below for details of each one:
1. Horizontal merger
This is the type of merger between companies that compete directly with each other in a segment. They are carried out in order to increase market power or market share.
2. Vertical mergers
This is the type of merger between companies operating within the same supply chain. The purpose of a vertical merger is usually to provide better quality control and more efficient communication between the different stages of the supply chain.
3. Market Extension Mergers
This scheme takes place between companies that commercialise the same goods or services but operate in different markets. The aim of a market extension merger is to gain access to a wider market by combining the companies' audiences, i.e. to reach more potential consumers.
4. Product extension mergers
This type, in turn, comprises companies that commercialise related goods or services and operate within a single market. The result of this merger is an association of products that helps to win over more consumers within that target market.
5. Conglomerate mergers
This merger takes place between companies that do not share common production aspects. Conglomerate mergers are subdivided into two types:
- The pure one, which unites companies operating in different markets.
- Mixed, which comprises businesses that aim to expand product lines or target markets
Types of corporate acquisitions
Acquisitions represent the commercialisation of a company's shareholding power. They can be of two types:
1. Friendly acquisitions
In this type of acquisition, the executives of the target company agree with the acquiring company during the due diligence stage, as they see the transaction as cost-effective.
2. Unfriendly or hostile takeovers
Hostile takeovers, on the other hand, comprise the acquisition of the largest share of a company's capital on the open market, against the wishes of the acquiring company's board of directors.
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