Mergers and acquisitions are spurred by economic factors. The performance of the economy, which includes the growth in GDP, interest rates, and monetary policies play a significant role in the process of mergers or acquisitions between companies and organizations. The following types of business combinations are known as mergers: conglomerate merger, horizontal merger, market extension merger, vertical merger, and product extension merger. The term that describes the merger depends on its economic function, the purpose of the business transaction, and the relationship between the merging companies.
The two types of conglomerate are “pure” mergers and “mixed” mergers. Mergers between firms that are involved in unrelated businesses are known as pure conglomerate mergers. Mixed conglomerate mergers involve firms that are looking for product or market extensions.
A horizontal merger is a business consolidation between firms that operate in the same space, often as competitors offering the same good or service. Horizontal mergers are common in industries with fewer firms, as competition tends to be higher and potential gains in market share are greater for merging firms in such an industry.
Market Extension Mergers
A market extension merger takes place between two companies that offer the same products in separate markets. The market extension merger ensures that the merging companies get access to a bigger market with a larger customer base.
For more information, contact ProGuide, a company that has worked with clients on dozens of mergers and acquisitions in Fort Lauderdale and throughout the country, with transactions ranging from $20 million to nearly $3 billion.