Mergers are business combination transactions involving the combination of two or more companies into a single entity.

Most state laws require that mergers be approved by at least a majority of a company's shareholders if the merger will have a significant impact on either the acquiring or target company.
A conglomerate merger is officially defined as being "any merger that is not horizontal or vertical; in general, it is the combination of firms in different industries or firms operating in different geographic areas". Conglomerate mergers can serve various purposes, including extending corporate territories and extending a product range. One example of a conglomerate merger was the merger between the Walt [1][2] Disney Company and the American Broadcasting Company. Because a conglomerate merger is one between two strategically unrelated firms, it is unlikely that they economic benefits will be generated for the target or the bidder. As such, conglomerate mergers seldom occur today. However, conglomerate mergers were popular in the U.S. in the 1960s and 1970s. Many conglomerate mergers are divested shortly after they are completed

Definition of 'Conglomerate Merger'
A merger between firms that are involved in totally unrelated business activities. 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.

Types of Conglomerate Mergers
There are two main types of conglomerate mergers – the pure conglomerate merger and the mixed conglomerate merger. The pure conglomerate merger is one where the merging companies are doing businesses that are totally unrelated to each other. The mixed conglomerate mergers are ones where the companies that are merging with each other are doing so with the main purpose of gaining access to a wider market and client base or for expanding the range of products and services that are being provided by them There are also some other subdivisions of conglomerate mergers like the financial conglomerates, the concentric companies, and the managerial conglomerates.

Reasons of Conglomerate Mergers
There are several reasons as to why a company may go for a conglomerate merger. Among the more common reasons are adding to the share of the market that is owned by the company and indulging in cross selling. The companies also look to add to their overall synergy and productivity by adopting the method of conglomerate mergers.

Benefits of Conglomerate Mergers
There are several advantages of the conglomerate mergers. One of the major benefits is that conglomerate mergers assist the companies to diversify. As a result of conglomerate mergers the merging companies can also bring down the levels of their exposure to risks.

Implications of Conglomerate Mergers
There are several implications of conglomerate mergers. It has often been seen that companies are going for conglomerate mergers in order to increase their sizes. However, this also, at times, has adverse effects on the functioning of the new company. It has normally been observed that these companies are not able to perform like they used to before the merger took place.

Concentric MergerA merger of firms which are into similar type of business. Two types of conglomerate mergers:Pure conglomerate mergers involve firms with nothing in common. engaged in just such a transaction with its 2005 merger with Gillette. Pac-Man defenseScare off by purchasing large amounts of the acquiring company&apos. The term conglomerate mergers also implies that the two companies that are merging do not even have the same customer base as they are in totally different businesses. At the time. Example Attempted acquisition of Martin Marietta by Bendix Corporation in 1982 : Martin Marietta&apos. and overseas. offers dedicated and dial-up Internet access.This was evident in the 1960s when the conglomerate mergers were the general trend. and the merger created one of the world's biggest consumer product companies. In the endBendixCorporation was bought by Allied Corporation Conglomerate A merger between firms that are involved in totally unrelated business activities. a consumer goods company. Conglomerate merger When two companies have no common business but decide to pool resources for some other reason. The resulting company is faced with the same competition in each of its two markets after the merger as the individual firms were before the merger. Procter & Gamble was largely absent from the men's personal care market.Resisting company may even sell off non-vital assets to procure enough assets to buy out the acquirer. high-speed DSL and VPN services across the U. Procter & Gamble (NYSE:PG). a national ISP. while mixed conglomerate mergers involve firms that are looking for product extensions or market extensions. For example. there might be significant impact if the acquiring company happens to be a leading company of its market that is not concentrated and has a large number of entry barriers. Example A leading manufacturer of athletic shoes.  23. There are two types of conglomerate mergers: pure and mixed. Pure conglomerate mergers involve firms with nothing in common. these companies can carry out research activities and applied engineering processes.S. One example of a conglomerate merger was the merger between the Walt Disney Company and the American Broadcasting Company. Example of Concentric MergerNextlink is a competitive local exchange carrier offering services in 57 cities and building a nationwide IP network.s stock. 20.2. merges with a soft drink firm.  onglomerate MergerA merger between firms that are involved in totally unrelated business activities. . They are also able to add to their production as well as strengthen the marketing area that ensures better profitability. conglomerate merger arises when two or more firms in different markets producing unrelated goods join together to form a single firm. The companies' product portfolios were complimentary. the deal is called a conglomerate merger.of Bendix Corporation. The firms are not competitors producing similar products (which would make it a horizontal merger) nor do they have an input-output relation (which would make it a vertical merger). However. Mixed conglomerate mergers involve firms that are looking for product extensions or market extensions. however. An example of a conglomerate merger is that between an athletic shoe company and a soft drink company. 18.  Company.s management responded to takeover attempt by selling non-core businesses in order to attempt a takeover of its own . a sector led by Gillette. Concentric. It has normally been seen that a lot of companies that go for conglomerate mergers are able to manage a wide variety of activities in a particular market. Example of Conglomerate MergerWalt Disney Company and the American Broadcasting   19. It has been seen from case studies that conglomerate mergers do not affect the structures of the industries.

a leading manufacturer of athletic shoes. If several different markets are dominated by divisions owned by two large conglomerates. With so much competition between Juicy Foot and OmniConglomerate in several different markets. corporations have expanded their activities over the years through conglomerate mergers. Inc. Tasty Cola Drinks. And the Juice-Up division of Juicy Foot must still compete with OmniCola. the potential for collusion is greater. Beginning its existence as OmniMotors.S. for example. While conglomerate mergers tend to be relatively harmless. The resulting company (call it Juicy Foot) is faced with the same competition in each of its two markets after the merger as the individual firms were before the merger. and OmniMotors in the automobile market. the incentive to cooperate rather than compete is much greater. Inc. Conglomerate mergers are considered relatively harmless when it comes to inefficiencies that result from market control. However. a soft drink firm. controls OmniRun in the athletic shoe market. Also suppose that another conglomerate. which manufactured sundials. and others in the soft drink market. it focused exclusively on the production of automobiles. OmniComglomerate. that The Master Foot Company. it expanded and diversified through conglomerate mergers with such firms as The Acme Sundial Company. OmniCola in the soft drink market. Juicy Foot. Because a conglomerate merger is between two firms in different industries. and Mobility-Plus. The Master Foot division of Juicy Foot must still compete with its arch rival OmniRun. Suppose. which offered banking services. • Subcategories • Market extension mergers • Product extension mergers • Pure conglomerate mergers . which produced soft drinks. Frosty Grape. the degree ofcompetition within EACH industry is largely unaffected. which provided wireless telephone services. controls Digital Distance in the wireless telephone. Suppose. King Caffeine. that OmniConglomerate. OmniCell in the wireless telephone market. General Electric provides an excellent real world example. they can set the stage for problems. in addition to Juice-Up in the soft drink market and Master Foot in the athletic shoe market. Bank of the World. market and Mega Mobile in the automobile market.A number of major U. for example. offers an example of how a firm can expand through conglomerate mergers. CONGLOMERATE MERGERS •Why do firms engage in conglomerate mergers? •When can conglomerate mergers harm competition? What are conglomerate mergers? • Combine firms which are neither direct competitors nor buyer-sellers. merges with Juice-up. In the hypothetical world of Shady Valley.

(Similar to horizontal mergers. • International Telephone & Telegraph (IT&T). • Threat of potential competition (new entry) may be only force keeping price low. Anticompetitive effects of conglomerate mergers • Possibly facilitate anticompetitive practices such as reciprocal dealing and predatory p g ( pricing (to be discussed later in course).Market extension mergers • Firms produce similar products in different markets. • Replace inefficient management at acquired firm. Sheraton Hotels. • Possibly eliminate potential competition in an already highly concentrated market.. • Acquired Hartford Fire Insurance.) Examples of market extension mergers • Bank of America and NationsBank (1998). • Possible motivation: economies of scope. • Began as a telecommunication equipment manufacturer and telephone system operator. cost savings from large scale production. Pure conglomerate mergers • Firms have no obvious relationship. • Has since spun off most businesses. Internal Internal management may have better information than external capital markets. etc. Examples of pure conglomerate mergers • RJR Reynolds and Burmah Oil and Gas. Acquiring firm can replace board of directors and inefficient top management. • Possible motivations: • Better Better allocation of capital allocation of capital. • New AT&T (including SBC) and BellSouth (2006). Continental Baking. .

the business can also deploy managers as the need arises. Costs of advertising. • P&G tried to acquire Clorox. This means the business derives the benefits of lower costs per unit of output. businesses are able to diversify away their risks. • HHI > ___________. For instance. which tend to be up. Since the business uses the same managers to oversee a number of businesses. • Merger eliminates potential competition.sohoos. and computer support are also spread out across a larger number of business units. its cost of management per unit goes down by operating on a larger scale. During the winter. it is not subject to changes in demand for any one product. Adveantages: Efficiency  Since a conglomerate is made up of many different business units. research and development. Sponsored Links  o Free Billing & Invoicing Free online invoicing & Billing Free management solutions by SohoOs www. Not only that. the management will award the cash to the use that gets the best return. • Clorox Clorox was largest producer of household was largest producer of household liquid beach. making the most efficient use of human capital too. it does not experience a dip in sales during the winter. If different business units come up with different business plans for the use of the firm's capital. make up for the dip in lawn mower sales. This situation comes about as a result of increased sales and earnings for the combined business each business would not have obtained on its own. . • 49% market share. Diversification  By acquiring firms in different markets. • Entry by other firms is difficult. If a firm has exposure to market products. This synergistic effect comes about as a result of all the efficiencies a large conglomerate enjoys. This makes for efficient use of the firm's capital. if a firm sells both lawn mowers and snowblowers. was largest producer of soaps and detergents. Synergy is a situation in which the sum of the combined unit is more than the sum of each individual unit. it can use the cash the business generates to the most efficient use. Synergies  A conglomerate merger is also likely to produce synergies for the combining entities. Treatment of conglomerate mergers under the Non-Horizontal Merger Guidelines • Conglomerate mergers will be challenged if • Industry Industry is already highly concentrated is already highly concentrated. a very large company. the sales of snowblowers. when lawn mower sales tend to be down.com Economies of Scale  Another benefit that businesses see in conglomerate merger is they anticipate economies of scale. • Acquired firm has large market share.FTC v Procter and Gamble (1967) • P&G.

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