Most business person is aware that acquisitions and mergers cannot be classified easily. It is not a simple thing to define and explain about various aspects that become the causes whether the mergers and acquisitions are success or failed.
There two types of basic mergers which are the conglomerate mergers and congeneric mergers. Basically the conglomerate merger is the merger between different types of business or industries, while the congeneric merger is the merger of organizations from the same type of business or industries.
The congeneric mergers can be divided again in to two basic types which are the horizontal and vertical mergers. The horizontal merger is the type of merger where organizations that produce the same type of product or service are merger in to a single company.
Meanwhile the vertical merger is happen when the organizations that produce a product is merger with the organizations that produce the supporting product or providing service that supporting the product such as the merger of ice cream cone company with the ice cream company, or with the delivery company.
The horizontal mergers are often monitored by the antitrust legislation because this type of merger can result in monopoly, where a type of product is produced and controlled by a single company. Therefore, the legislation need monitored the merger to ensure the fairness of the business and to make sure that the company does not monopolize the business.
The main reason for business mergers is usually to increase the company’s profit where the company can reach out more customers and expand their market segment. It is also hoped that the business merger will improve the stock value by combining the company’s stocks value.
The merger’s process often called as synergy to define that the business from each party are blend and operated together. Some of the effects that often happen in the synergy are; eliminating the same function in company which will cause staff reductions, expand the market segment, getting the new technology, improve the production capacity to increase the profit and increase the company visibility.