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Basics of Corporate Re-Structuring, Mergers and Acquisitions

The document discusses different types of mergers and acquisitions including horizontal, vertical, conglomerate, market-extension, and product-extension mergers. It provides examples for each type. Horizontal mergers are between direct competitors to increase market share through economies of scale. Vertical mergers combine companies along the same supply chain for better quality control and information flow. Conglomerate mergers join unrelated companies in distinct markets, while market-extension and product-extension mergers expand into new markets or combine related products, respectively.

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65 views

Basics of Corporate Re-Structuring, Mergers and Acquisitions

The document discusses different types of mergers and acquisitions including horizontal, vertical, conglomerate, market-extension, and product-extension mergers. It provides examples for each type. Horizontal mergers are between direct competitors to increase market share through economies of scale. Vertical mergers combine companies along the same supply chain for better quality control and information flow. Conglomerate mergers join unrelated companies in distinct markets, while market-extension and product-extension mergers expand into new markets or combine related products, respectively.

Uploaded by

Ubaid Dar
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Amity College of Commerce & Finance

Module I:
Basics of Corporate Re-structuring,
Mergers and Acquisitions
Amity College of Commerce & Finance

TOPIC
Types of mergers, Horizontal, Vertical,
Conglomerate.
Amity College of Commerce & Finance
Amity College of Commerce & Finance

Horizontal Mergers
A horizontal merger is a merger between companies that directly
compete with each other.

To increase market power (market share)


To utilize economies of scale, and exploit merger synergies.

example of a horizontal merger was that between 


HP (Hewlett-Packard) and Compaq in 2011. The successful
merger between these two companies created a global
technology leader valued at over US$87 billion.
Amity College of Commerce & Finance

 
Amity College of Commerce & Finance

Vertical Mergers
Merger between companies that operate along the same supply chain.

Combination of companies along the production and distribution


process of a business.

To gain higher quality control, better flow of information along the


supply chain, and merger synergies.

A notable vertical merger happened between America Online and


Time Warner in 2000. The merger was considered a vertical merger
due to each company’s different operations in the supply chain – Time
Warner supplied information through CNN and Time Magazine while
AOL distributed information through the internet.
Amity College of Commerce & Finance
Amity College of Commerce & Finance

Market-Extension Mergers
A market-extension merger is a merger between companies that sell
the same products or services but that operate in different markets.

The goal of a market-extension merger is to gain access to a larger


market and thus a bigger client/customer base.

For example, RBC Centura’s merger with Eagle Bancshares Inc. in


2002 was a market-extension merger that helped RBC with its
growing operations in the North American market. Eagle Bancshares
owned Tucker Federal Bank, one of the biggest banks in Atlanta,
with over 250 workers and $1.1 billion in assets.
Amity College of Commerce & Finance
Amity College of Commerce & Finance

Product-Extension Mergers
Merger between companies that sell related products or services and that operate in
the same market.

By employing a product-extension merger, the merged company is able to group


their products together and gain access to more consumers. It is important to note
that the products and services of both companies are not the same, but they are
related.

The key is that they utilize similar distribution channels and common, or related,


production processions or supply chains.

For example, the merger between Mobilink Telecom Inc. and Broadcom is a product-
extension merger. The two companies both operate in the electronics industry and the
resulting merger allowed the companies to combine technologies. The merger
enabled the combination of Mobilink’s 2G and 2.5G technologies with Broadcom’s
802.11, Bluetooth, and DSP products. Therefore, the two companies are able to sell
products that complement each other.
Amity College of Commerce & Finance
Amity College of Commerce & Finance

Conglomerate Mergers
A conglomerate merger is a merger between companies that are totally unrelated.
There are two types of a conglomerate merger: pure and mixed.
 A pure conglomerate merger involves companies that are totally unrelated
and that operate in distinct markets.
 A mixed conglomerate merger involves companies that are looking to
expand product lines or target markets.
The biggest risk in a conglomerate merger is the immediate shift in business
operations resulting from the merger, as the two companies operate in completely
different markets and offer unrelated products/services.

For example, the merger between Walt Disney Company and the American
Broadcasting Company (ABC) was a conglomerate merger. Walt Disney
Company is an entertainment company, while American Broadcasting company
is a US commercial broadcast television network (media and news company).
 
Amity College of Commerce & Finance

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