CORPORATE FINANCE

MERGING OR JOINT
VENTURING:
WEIGHING THE
PROS AND CONS

TIVIYA SANDRAN (223023656)

18/05/2023
 CORPORATE FINANCE

Introduction to Mergers Advantages of Joint

and Joint Ventures Ventures

Table Of Advantages of Mergers Disadvantages of Joint

Ventures

Content Disadvantages of
Mergers
Conclusion
 CORPORATE FINANCE

Introduction to Mergers & Joint

Ventures
Mergers and joint ventures are two common strategies
used by companies to expand their operations.

A merger is a business combination involving two or more

companies, resulting in the creation of a new entity.

In contrast, a joint venture is a partnership between two

or more companies for a specific project or purpose.
 CORPORATE FINANCE

Advantages of Mergers
Increased market power. By combining resources, companies
can increase their market share and negotiate better deals with
suppliers and customers. Additionally, mergers can result in
cost savings through economies of scale, as larger companies
are often able to produce goods and services more efficiently.

Diversification. Companies can merge with firms in different

industries to reduce their dependence on a single product or
market. This can help to mitigate risk and stabilize earnings
over time.
 CORPORATE FINANCE

20% 20%

Disadvantages of Mergers
Potential for Cultural Clashes:
When companies merge, there may be differences in management
style, corporate culture, and employee expectations. These
differences can lead to conflict and hinder the integration process.

20% 20%
The Risk of Antitrust Violations:
If the new entity created by the merger has too much market power,
it may be subject to government scrutiny and regulation.

20%
 CORPORATE FINANCE

Advantages of Joint
Ventures
Shared Risk :
By partnering with another company, firms
can spread the financial risk of a project or
investment. This can be especially beneficial
for small businesses that may not have the
resources to take on large projects alone.
Access to New Markets & Technologies :
By partnering with a company in a different
industry or geographic region, firms can
gain access to new customers, distribution
channels, and technology.
 CORPORATE FINANCE

Potential for conflicts of interest :

Each partner may have different goals and priorities, which
can lead to disagreements over strategy and decision-
making.

Disadvantages of
Joint Ventures The lack of control :
When partnering with another company, firms may need to
compromise on certain aspects of the project or
investment. This can limit their ability to make decisions
and fully realize the benefits of the partnership.
 CORPORATE FINANCE
Conclusion
In conclusion, both mergers and joint ventures offer
unique advantages and disadvantages that companies
must carefully consider before pursuing either strategy.
Mergers can provide increased market power and
diversification, but also carry the risk of cultural
clashes and antitrust violations.
Joint ventures can offer shared risk and access to new
markets and technologies, but also pose the risk of
conflicts of interest and lack of control.
 CORPORATE FINANCE

THANK
YOU