When two or more companies combine their assets to create one large corporation, it’s called a business merger. This can happen for various reasons, and increasing financial capacity is the most common reason. It may also be an attempt to increase the amount of money their shareholders stand to make. Each type of merger gets its name depending on what the primary objective of the merger is.
Benefits of Vertical Mergers
Vertical mergers occur when two or more companies that produce the same, or same kinds of products, in different stages. These two or more companies join together so that there is never an interruption in production, leading to greater profits. For example, a company might be involved in producing frozen beef stew. It has to order its frozen peas and carrots from a separate company that specializes in frozen vegetables. A merger between these two companies helps the manufacturing process move swiftly due to the union of once separate operations.
Benefits of Horizontal Mergers
When two separate companies produce the same goods under different brand names and have been competing with each other in the past, a horizontal merger is very possible after some time. It would be easier if these two powerhouses joined forces to produce one superior product under one brand name. All monetary, human and material resources are directed at the same goal; to provide one product or service. Usually, a superior product or service that can be sold at a premium price is the result of a horizontal merger. Additionally, more resources are available to produce multiple variations of the product or service.
Benefits of Congeneric Mergers
Sometimes, two or more companies provide services or produce products that are related to one another and decide to merge. For example, if you owned a web hosting company, you might want to merge your company with a web development company. This kind of business unification is called a congeneric merger. It’s convenient to both sides because both companies are in the business of helping business owners set up their websites, just in different ways. It’s easy for these two companies to expand and grow into a brand with a wider variety of products and services under one brand name.