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3 Types of Mergers Learn About Difference

Merger Definition (What is a Merger?)

What is a merger? Which I would like to say simply. A merger and amalgamation refer to the combination of two or more companies into one company. And one or more companies can be merged into an existing company.

Either they can merge to become another new company. Who has to understand it. Which however adds companies to another new company. So there are many types of mergers. Which companies complete the merger?

When under the law in India, for example, I use the word amalgamation for the merger, as section 2 [IA] of the Income Tax Act, 1961 refers to one or more companies “called amalgamating companies or companies. Is “which defines amalgamation as a merger? “Called amalgamated company”

For this, a merger is classified into the following three types.

  • Horizontal
  • Vertical
  • Conglomerate.

Let us pay attention to this.

1. Horizontal Merger

When does a horizontal merger occur? Horizontal mergers occur when two or more corporate firms work together or support similar activities. If, for example, when two publishers or either of two goods manufacturing companies merges.

Reduction or reduction of competition, price reductions, elimination of economies of scale in production, research and development, marketing, and management are often cited objectives for such mergers.

2. Vertical Merger

A vertical merger is a combination of two or more firms involved in different stages of production or distribution. For example, joining a spinning company and a weaving company. Which can be either vertical merge forward or backward merge. When any company connects with the supplier of the material, it is called a backward merger.

And when it connects with the customer, it is known as a forward merger. So these are the main advantages of such mergers such as low distribution cost of material, low purchase cost, assured supply and market, either creating barriers to entry with competitors, etc.

3. Conglomerate Merger

A Conglomerate merger is a combination. In which in an industry, a firm is affiliated with a firm from an unrelated industry. Which is a typical example of the merger of various businesses such as manufacturing cement fertilizer products, products, electronic products, insurance investment, and advertising agencies.

Joe Voltas Limited (Voltas Limited is an Indian multinational household appliance company specializing in air conditioning and cooling technology.) Is an example of a group company? Diversification of risk constitutes the rationale for such a merger.

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