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Best Definition of Merger

definition of merger
A merger is a corporate strategy of combining different companies into a single company in order to enhance the financial and operational strengths of both organizations. In simple words, combining two or more business enterprise into a single entity  is called merger.

Meaning of Merger

A Merger which has an own business policy of growth of a business. It does not treat as a combination of business. Merger works on a permanent basis. Basically, merge happens between the two companies. However, it can also perform with more than two companies. During the merger, an acquiring company and acquired companies come together to decide and execute a merger agreement between them.

Acquiring company is a company which purchases most of the equity shares of one or more company.

Acquired company are those who sells most of their equity shares to an acquiring company. After merging, acquiring company starts operating and acquired company disappears.

There are three types merger such as:
  • Horizontal merger: Horizontal merger are types of merger that involves companies in direct competition with one another. This type of merger reduces competition from the market and makes a company more stronger and more competitive. And also a company can get more financial support to increase its operation.  For example, the two car companies one is Chrysler and anther is Daimler Benz. Both companies wanted to merge and once combined were called Daimler Chrysler. This was the most famous merge in the international marketplace.
  • Vertical merger: A vertical merger is one of the most common types of mergers. People often use this type of merging. When a company merges with either a supplier or a customer to create an extension of the supply chain its known as vertical merger. An example of vertical merger is a steel company merging with the car manufacturer. The steel company was previously a supplier to the car manufacturer but after merging would be a part of the same company. Such a vertical merger will reduce the cost steel for the automakers and potentially will expand business to supplying steel to the competitor automaker. 
  • Conglomerate merger: Conglomerate mergers are a type of merger that involves companies that are in different market business. There is no relation between the type of business of both companies. For example, one company is in car business and the other one is in pen business, when this two company will merge it will be called conglomerate merger. This type of merger is typically a part of desire when one company wants to grow its financial wealth by merging with the completely unrelated company. The most famous conglomerate merging happened between the Walt Disney Company and The American Broadcasting Company.

    Basically, There are two types of conglomerate merger such as:
  • Pure conglomerate mergers involve companies that has nothing in common. Both companies are from the different market field.
  • Mixed conglomerate merger is a type of conglomerate merger where merging occur between two companies that want to reach a wider market and audience through product extensions or market extensions.
What is merger? Definition, meaning and types of merger
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