MERGER AND

IT’S TYPES

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MERGERA merger is a transaction that result in the transfer of ownership and control of a corporation.

When one company purchases another company of an approximately similar size. The two companies come together to become one.

Two companies usually agree to merge when they feel that they can do something together that they can not do one their own.

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EXAMPLES:

Rajasthan bank and ICICI bank

Arcelor Mittal

Renault and Nissan

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TYPES OF MERGER

CONGLOMERATE

VERTICAL HORIZONTAL

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HORIZONTAL MERGERA merger occurring between companies producing similar products, goods and offerings similar services.This type of merger occurs frequently as a result of larger companies attempting to create more effective economies of scale.Example- •The merger of Centurion bank and Bank of Punjab, Oriental Bank of Commerce and GTB.•Tata Industrial Finance Ltd. with Tata Finance Ltd. •Essar-Hutch and BPL’s mobile merger•Brook Bond with Lipton

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VERTICAL MERGERA merger between two companies producing different goods and services for one specific finished products.The merger of the firm that have actual or potential buyer-seller relationship.Car manufacture purchasing a tire company.Example- Nirma bid for Gujrat Heavy Chemical (backward integration) or Hindalco Bidding for Pennar Aluminium (forward integration).

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CONGLOMERATE MERGER

A merge between firms that are involved in totally interrelated business activity.

This involve merger between firms engaged in unrelated types of business activity.

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Two types of conglomerate merger are:

Pure conglomerate merger- It involve firms with nothing common.

Mixed conglomerate merger- It involves firms that are looking for product extensions or market extensions.

Example- PepsiCo-Pizza Hut; Proctor & Gamble-Clorox.

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• Product Extension Merger

-Are mergers between firms in related business activities and may also be called concentric mergers. These mergers broaden the product lines of the firms.

-E.g. Phillip Morris-Kraft, Pepsico- Pizza Hut, Proctor and Gamble and Clorox

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•Market-extension merger

-Conglomerate mergers wherein companies that sell the same products in different markets/ geographic markets.

-E.g. Morrison supermarkets and Safeway, Time Warner-TCI.

Ways of merger – A merger can take place

in following ways:

By purchasing of assets

By purchase of common shares

By exchanging of shares for assets

By exchanging of shares for shares

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M&A Process1. Develop a strategic plan for the business (Business Plan)2. Building Acquisition Plan3. Search companies for acquisition (Search)4. Screen and prioritize potential companies (Screen)5. Initiate contact with the target (First contact)6. Refine valuation, structure the deal, perform due

diligence, and develop financing plan (Negotiation)7. Develop plan for integrating the acquired business

(Integration plan)8. Obtain all the necessary approvals, resolve post-closing

issues and implement closing (Closing)9. Implement post-closing integration (Integration)10.Conduct the post closing evaluation of acquisition

(Evaluation)

Reasons of merger

Future goals Mutual

benefits

Maximizing profits

Expansion of business

Economy of scale

Increase market share

Cost maximizati

on

Diversification of risk

Goodwill

Product improvement

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