Types of Mergers

a) Horizontal Merger: A horizontal merger occurs when companies selling similar products in the same market and competing directly merge. This consolidation aims to benefit from economies of scale, reduce competition, and potentially attain monopoly status. An example is Facebook’s acquisition of Instagram in 2012 to expand its market share and product line in the social media industry.

b) Vertical Merger: A vertical merger takes place between companies within the same industry but at different stages of the production process. These companies engage in mergers to streamline operations, reduce costs, and enhance profitability. For instance, if XYZ Ltd., a shoe manufacturer, merges with ABC Ltd., a leather producer, to integrate their supply chain and improve efficiency.

c) Conglomerate Merger: A conglomerate merger involves the combination of two companies operating in entirely unrelated industries. The primary objective is to achieve diversification and expand market presence. An example could be a watch manufacturer acquiring a cement production company, aiming to broaden its business portfolio.

d) Congeneric Merger: A congeneric merger occurs between businesses related in terms of customer groups, functions, or technology. These mergers aim to leverage synergies and complement each other’s offerings. For instance, a computer system manufacturer merging with a UPS manufacturer to enhance their combined product offerings.

e) Reverse Merger: In a reverse merger, a private company becomes a public company by acquiring an existing publicly traded entity. This approach enables the private company to access public markets without undergoing the complex and costly process of an initial public offering (IPO). An example is ICICI’s merger with its subsidiary ICICI Bank in 2002, facilitating the transition to a public company status.

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