Various types of mergers
In today’s economic climate, a lot of companies find it extremely difficult to compete with rivals. The economy is extremely volatile and new competitors are coming up periodically. This has directly threatened the existence of several companies, irrespective of their size and market share. Mergers & Acquisitions are a good way to handle such situations. In a corporate environment, mergers and acquisitions are a feature of management, finance and strategy. It involves the combining, dividing, selling or buying or multiple companies with similar or different interests. The primary aspect of this is to enable a struggling enterprise grow quickly and get ahead of the competition.
Nowadays, most people use the terms merger and acquisition interchangeably. However, from a legal aspect, they are slightly different. A merger is the joining together of two organizations to form a single entity. The stocks of both firms are surrendered and a new one is issued. The merger is usually a mutual decision between the two companies. If successful, both companies will generate profit due to the merger. On the other hand, an acquisition is the takeover of one company by another. The parent company will have full ownership of the acquired company. Acquisitions can be friendly as well as hostile.
If the acquisition is a friendly one, it can be considered to be a merger. Axiom Advisors are extremely beneficial during acquisitions and mergers. Such advisors will have a thorough understanding of the various aspects of the merger. Based on the nature of the companies joining together, mergers can be further divided into various types. In a horizontal merger, the two companies will have similar interests. They could be having similar products or services and would have been competing in the same market. By joining forces, the merged company will have a better chance of success.
When two companies which are unrelated, but on the same production line join together, it is known as a vertical merger. This usually happens when retailers and manufacturers join together. This enables the merged company to have a better say in the market demand and supply. The joining of two businesses which are completely unrelated is called a conglomeration. Product extension merger is closely related to horizontal merger. The difference is that the two companies will be offering similar products or services in different markets. On the other hand, if the two companies sell different products but operate in the same market, it is called a product extension merger.
Over the years, several mergers and acquisitions have occurred in various markets around the globe. Some have had significant impacts on the global economy, while others have only affected regional markets. A close study of these mergers reveals that success is not guaranteed in most of the cases. However, the merging companies can take a lot of steps to ensure that the merger or acquisition pays off in future. One of the best steps to ensure a successful merger is to hire the services of an expert axiom adviser. Clarity and prudence are two important aspects that should be considered during the merger.
Important Aspects of Mergers and Acquisitions