Guide To Mergers

Guide To Mergers

Guide to​ mergers
The economy today is​ not stabilized . ​
Even big companies have to​ confront the ups and​ downs that come their way . ​
But the only thing that keeps them going is​ survival . ​
They have to​ survive in​ the market and​ progress swiftly or​ gradually . ​
One strategy to​ advancement is​ that of​ ‘mergers’ between companies . ​
There are numerous mergers that take place locally but they do not have a​ great effect on the market especially the consumers . ​
But the mergers that take place at​ the national or​ international level have a​ profound impact on the economies of​ the concerned countries . ​

There are different reasons behind a​ merger of​ two or​ more companies . ​
But first of​ all there exist diverse types of​ mergers . ​

a Horizontal Mergers where two competing companies conjoin to​ form a​ single large company . ​
The companies in​ horizontal mergers are selling the same product in​ the same market and​ so are contenders to​ each other . ​
Such a​ merger can have a​ tremendous influence on the market from creating monopoly to​ escalating prices of​ the commodity . ​
This is​ precisely the reason that The Federal Trade . ​

b Commission that is​ worried about the market and​ the consumers keeps a​ hawk’s eye on such mergers and​ at​ times detains the companies from merging in​ the interest of​ the people . ​

c The Vertical Mergers are the mergers between a​ supplier and​ the distributor company of​ the supplies . ​
This is​ an​ anti competitive merger but can be highly beneficial to​ the company . ​
it​ is​ because the distributor will no more have to​ pay for​ the manufacturing of​ the supplies, it​ gets the product at​ the base price . ​
So there is​ good cost saving due to​ this . ​
Vertical merger also rules out lot of​ competition from the market . ​

d Market Extension Merger is​ between the companies selling same product but in​ different markets . ​
This merger enhances the market for​ the two companies since they now act as​ one sole company . ​

e Product Extension Merger is​ like the one between an​ eminent company making motor parts and​ another that makes their own cars . ​
So, the companies involved here sell different but more or​ less the same product in​ the same market . ​
This merger promotes the sale of​ both the companies significantly . ​

f Conglomeration is​ a​ merger where the concerned companies have nothing in​ common to​ sell . ​

There are various reasons behind merger of​ companies . ​
a Synergy factor prompts the merger of​ most of​ the companies . ​
The synergy in​ business pertains to​ the cost saving and​ revenue enhancement . ​
The companies after merger decrease the staff keeping only the skilled labor, work with a​ single managing director, CEO etc . ​
So there is​ good outlay saving . ​
Moreover the economy of​ the sale i . ​
e . ​
the purchasing power of​ the company booms after merger . ​

b To increase the output and​ rule the market many mergers are made with the intention to​ oust the competition and​ jointly rule the market . ​
This presupposes healthy relations between the competing companies . ​

c Mergers also take place when a​ company is​ not able to​ perform well due to​ some or​ the other cause like the lack of​ required investment in​ the form of​ capital, tremendous competition etc . ​
in​ such a​ situation this company can merge with one its parent company or​ any other company that has faith in​ the prior goodwill of​ the declining company and​ in​ its potential to​ grow and​ enhance . ​
So companies also merge in​ order to​ overcome their internal inconsistencies . ​

d Many a​ mergers besides economically are also politically driven . ​

e Acquisitions which imply taking over of​ one stronger company with the other weaker one are also at​ times veiled by the name of​ merger . ​

However, the directors who plan to​ merge their companies should actually contemplate over it, keeping in​ mind all the possible pros and​ cons . ​
They must seek advice from neutral financial consultants who do are more inclined towards the welfare of​ the company and​ not their own . ​
Their own benefit is​ also hidden in​ a​ merger since the wages of​ the employees increase with the advancement due to​ merger . ​
So it​ is​ recommended to​ take advice from all those who are the well wishers of​ the company before taking any concrete step in​ this direction . ​

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