MERGERS

• A merger is a business deal where two or more

companies combine into a single entity. This can
happen for various reasons, such as expanding market
presence, increasing efficiency, or diversifying product
offerings. The result is a new, larger company that
incorporates the assets and operations of the merged
businesses.
 TYPES OF MERGERS

• Horizontal merger.
• Vertical merger .
• Conglomerate Merger.
• Concentric merger.
Horizontal merger
A horizontal merger occurs when two companies operating in the same or
similar industries and at the same stage of the production process combine
their operations. The primary objective of a horizontal merger is to gain market
share, reduce competition, and achieve economies of scale.
Eg. 1)Exxon and Mobil: In 1999, Exxon and Mobil, two major oil and gas
companies, merged to form ExxonMobil. This horizontal merger brought together
two giants in the energy sector, allowing them to pool their resources, reduce
operating costs, and enhance their competitive position in the oil industry.
2)Vodafone and idea: Vodafone and Idea Cellular is an example of a horizontal
merger because both companies were operating in the same
telecommunications industry in India and merged to gain a larger market share
and reduce competition.
vertical merger
• A vertical merger is a type of business consolidation in which two companies operating
at different stages of the production or distribution chain within the same industry come
together. The primary goal of a vertical merger is to improve efficiency and control over
the supply chain. For example, if a car manufacturer acquires a company that produces
tires, it's a vertical merger as it allows the car manufacturer to have greater control and
potentially reduce costs in the production process.
• Eg: 1)Ford and Visteon:Ford, an automobile manufacturer, spun off Visteon, a parts and
automotive technology supplier, and then later reabsorbed certain divisions in a vertical
merger. This allowed Ford to have more control over the production of certain auto
components, enhancing its supply chain efficiency
• 2)Reliance Industries and Network18:Reliance Industries Limited, in telecommunications
and media, acquired Network18 Media & Investments Limited. Network18 is a media
company with holdings in television, digital content, and publishing. This vertical merger
allowed Reliance to integrate content creation and distribution through its Jio network,
enhancing its media offerings for consumers
Conglomerate Merger
• A conglomerate merger is a type of merger where two or more companies from
unrelated industries or with different lines of business come together to form a
single entity. The primary goal of a conglomerate merger is diversification and risk
reduction by entering new markets. This type of merger is often driven by the desire
to achieve a broader and more balanced portfolio of businesses.
• 1)General Electric (GE) and NBC Universal (NBCU):General Electric, known for its
presence in industries like aviation, healthcare, and energy, acquired a majority stake
in NBC Universal, a media and entertainment company. This conglomerate merger
allowed GE to diversify its holdings into the media sector. Eventually, Comcast acquired
a controlling interest in NBC Universal, and the entity evolved into NBCUniversal.
• 2)Tata Group : The Tata Group is a prime example of a conglomerate in India. The
group has diverse interests, including automotive, steel, telecommunications, and
information technology. Tata's expansion into various sectors showcases the
conglomerate merger concept at a corporate group level, where the individual
companies under the Tata umbrella are often in different industries.
Concentric merger
• A concentric merger is a type of merger in which two companies operating in
related industries or with related products and services combine. The key
idea is that the merging companies have complementary business activities,
which can lead to synergies and improved competitiveness.
• Eg:1)Google and Nest Labs : In 2014, Google acquired Nest Labs, a company
specializing in smart home technology, including smart thermostats and smoke
detectors. This concentric merger allowed Google to expand into the growing
market of home automation and connected devices, complementing its
existing technology and digital services.
• 2)Aditya Birla Group and Pantaloons : The Aditya Birla Group, a prominent
Indian conglomerate with interests in various sectors, acquired Pantaloons, a
retail clothing chain in India. This concentric merger allowed the Aditya Birla
Group to diversify further into the retail and fashion industry, which is related
to its existing interests in textiles and apparel.