Merger is the combination of two or more companies which can be merged together either by way of amalgamation or absorption or by formation of a new company. The combining of two or more companies, is generally by offering the stockholders of one company securities in the acquiring company in exchange for the surrender of their stock.
Merger may be
- Horizontal Merger – It is a merger of two or more companies that compete in the same industry. It expands as he firm’s operation in the same industry. hence, it is a merger with a direct competitor. Horizontal mergers are designed to achieve economics of scale and result in reducing the number of competitors in the industry.
- Vertical Merger – It is a merger which takes place upon the combination of two companies which are operating in the same industry but at different stages of production or distribution system.
- Congeneric Merger – It is the type of merger, where two companies are in the same or related industries but do not offer the same products, but related products and may share similar distribution channels, providing synergies for the merger.
- Conglomerate Merger – these mergers are merger of different kinds of businesses under one flagship company. conglomerate mergers involve firms engaged in unrelated type of activities i.e. the business of two companies are not related to each other horizontally or vertically.
