MERGER AND AMALGAMATION

MERGER AND AMALGAMATION

A merger represents a corporate strategy where two companies come together to operate as a single legal entity. Typically, companies opting for a merger are of equal size and scale in their operations.

Types of Mergers

1. Congeneric/Product Extension Merger:
   • Occurs between companies in the same market.
   • Results in adding a new product to one company's existing product line.
   • Enhances access to a broader customer base and increases market share.
2. Conglomerate Merger:
   • Involves companies in unrelated activities.
   • Executed to increase shareholder wealth.
3. Reverse Merger:
   • Involves companies in different markets but selling similar products.
   • Aims to access a larger market and customer base.
4. Horizontal Merger:
   • Involves companies selling similar products in the same market, directly competing, and sharing the same product lines and markets.
   • Decreases competition in the market.
5. Vertical Merger:
   • Occurs between companies in the same industry but at different levels in the supply chain.
   • Aims to increase synergies, supply chain control, and efficiency.

Advantages of a Merger

1. Increased Market Share:
   • Expands market reach and grows revenues.
   • Improves standing in the investment community.
2. Elimination of Competitors:
   • Mergers may eliminate competition, avoiding duplication and reducing prices.

Disadvantages of a Merger

1. Communication Gaps:
   • Different corporate cultures may result in communication challenges affecting employee performance.
2. Unemployment:
   • Aggressive mergers may lead to job losses as companies may eliminate underperforming assets.