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MERGER

AND
ITS TYPES

MERGER
A merger is a transaction that
result in the transfer of
ownership and control of a
corporation.
When one company
purchases another company of
an approximately similar size.
The two companies come
together to become one.
Two companies usually agree
to merge when they feel that
they can do something

EXAMPLES:
Rajasthan bank and ICICI
bank
Arcelor Mittal
Renault and Nissan

TYPES OF
MERGER

CONGLOMERA
TE

VERTICAL

HORIZONTA
L

HORIZONTAL MERGER
A merger occurring between companies
producing similar products, goods and
offerings similar services.
This type of merger occurs frequently as
a result of larger companies attempting to
create more effective economies of scale.
ExampleThe merger of Centurion bank and
Bank of Punjab, Oriental Bank of
Commerce and GTB.
Tata Industrial Finance Ltd. with Tata
Finance Ltd.
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Essar-Hutch
and
BPLs
mobile

VERTICAL MERGER
A
merger
between
two
companies producing different
goods and services for one
specific finished products.
The merger of the firm that
have actual or potential buyerseller relationship.
Car manufacture purchasing
a tire company.
Example- Nirma bid for
Gujrat
Heavy
Chemical
(backward integration) or
Hindalco Bidding for Pennar

CONGLOMERATE
MERGER

A merge between firms that


are involved in totally
interrelated business activity.

This involve merger between


firms engaged in unrelated
types of business activity.

Two types of conglomerate merger are:


Pure conglomerate merger- It
involve firms with nothing common.
Mixed conglomerate merger- It
involves firms that are looking for product
extensions or market extensions.
Example- PepsiCo-Pizza Hut; Proctor
& Gamble-Clorox.

Product Extension Merger

-Are mergers between firms in related


business activities and may also be called
concentric
mergers.
These
mergers
broaden the product lines of the firms.
-E.g. Phillip Morris-Kraft, Pepsico- Pizza Hut,
Proctor and Gamble and Clorox

Market-extension merger
-Conglomerate mergers wherein
companies that sell the same
products in different markets/
geographic markets.
-E.g. Morrison supermarkets and
Safeway, Time Warner-TCI.

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Ways of merger A merger can


take place in following ways:
By purchasing of assets
By purchase of common shares
By exchanging of shares for
assets
By exchanging of shares for
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M&A Process
1. Develop a strategic plan for the business
(Business Plan)
2. Building Acquisition Plan
3. Search companies for acquisition (Search)
4. Screen and prioritize potential companies
(Screen)
5. Initiate contact with the target (First contact)
6. Refine valuation, structure the deal, perform
due diligence, and develop financing plan
(Negotiation)
7. Develop plan for integrating the acquired
business (Integration plan)
8. Obtain all the necessary approvals, resolve
post-closing issues and implement closing
(Closing)
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9. Implement post-closing integration

Product
improvem
ent

Goodwil
l

Diversi
ficatio
n of
risk

Cost
maxi
mizat
ion

Futur
e
goals

Reaso
ns of
merge
r
Increas
e
market
share

Mutua
l
benefi
ts
Maximi
zing
profits
Expans
ion of
busine
ss

Econo
my of
scale
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