Merger and Acquisition

What is a 'Vertical Merger' A vertical merger is the merger of two or more companies involved at different stages in the supply chain process for a common good or service.  Most often, the merger is purposed to increase synergies, gain more control of the supply chain process, and increase business.  Also, it often results in reduced costs and increased productivity and efficiency. For An Example An example of a vertical merger is a car manufacturer purchasing a tire company. Such a vertical merger reduces the cost of tires for the automaker and potentially expands its business by allowing it to supply tires to competing automakers. This example shows how a vertical merger can be twice as beneficial to the company conducting the integration. Initially, the firm benefits from reduced costs, which lead to increased profits. The second benefit is an expansion in revenue streams that also increases the  bottom line .  A notable vertical merger was...

What is a 'Conglomerate Merger' A conglomerate merger is a merger between firms that are involved in totally unrelated business activities.  These mergers typically occur between firms within different industries or firms located in different geographical locations.  There are two types of conglomerate mergers: pure and mixed. Pure conglomerate mergers involve firms with nothing in common, while mixed conglomerate mergers involve firms that are looking for product extensions or market extensions. Advantages Despite its rarity, conglomerate mergers have several advantages: diversification, an expanded customer base, and increased efficiency.  Through diversification, the risk of loss lessens.  If one business sector performs poorly, other better-performing business units can compensate for losses.  The merger allows the firm to access a new pool of customers, thereby expanding its customer base.  This new opportunity allows the firm t...