Merger

Written by Fmi.Online Friday January 6, 2023
A merger is the combination of two companies into one by either closing the old entities into one new entity or by one company absorbing the other. In other words, two or more companies are consolidated into one company.

Explanation :

A merger is a financial activity that is undertaken in a large variety of industries: healthcare, financial institutions, private investments, industrials, and many more. There are two main types of mergers: horizontal and vertical. Horizontal mergers occur when two businesses in the same industry combine into one. This type of combination can cause anti-trust issues depending on the industry. For instance, GM and Ford may not be allowed to merge because of antitrust laws. Vertical mergers occur when two businesses in the same value chain or supply chain merge. For example a hamburger restaurant might merge with a cow farm.

In a nutshell :

  • Mergers are a way for companies to expand their reach, expand into new segments, or gain market share.
  • A merger is the voluntary fusion of two companies on broadly equal terms into one new legal entity.
  • The five major types of mergers are conglomerate, congeneric, market extension, horizontal, and vertical.
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