Horizontal MergersA merger between two firms in the same industry that produce the same products and services. This can create economies of scale and reduce competition in an industry.
Two large telecom companies merge in hopes of reducing price competition in a market.
Vertical MergersA merger between two firms in the same industry that operate at different levels of the value chain. This can reduce costs and provide operational stability.
An electric car manufacturer buys a battery manufacturer to secure a steady supply of critical components and reduce costs.
Congeneric MergerA merger between firms with different products but similar customers. This allows the merged firm to become a one-stop-shop for customers.
A merger between a bank and an insurance company that allows the merged firm to sell a large number of products to the same customers.
Conglomerate MergerA merger between firms in different industries. This may allow for an extension of a brand and for cost savings in areas such as overhead. This is typical of large firms that seek to dominate the economy in a particular country, often with the support of a government.
A merger between a technology company and a construction company that seeks to create a massive firm out of two large firms.
Global MergerA merger between firms in different countries that can be any of the types above.
A solar panel manufacturing firm in the United States merges with a firm in Vietnam to access lower cost manufacturing facilities and to increase scale.
AcquisitionsTechnically speaking, a merger occurs between two equals. When one company simply buys another, this is an acquisition. The difference between these two types of transactions is so murky that it is common to refer to them with the combined term mergers & acquisitions.
A technology company buys a smaller firm to acquire its know-how and talent.
SummaryThe main points to know about each type of merger.
|Merger between firms with the same products and services.
|Reduce competition, improve economies of scale.
|Merger between firms in the same industry at a different level of the value chain
|Reduce costs, stabilize operations, control quality.
|Merger between firms with different products but the same customers.
|Sell more products to a loyal customer base.
|Merger between firms in different industries.
|Extend a brand, reduce costs, dominate an economy.
|A merger between firms in different countries.
|Lower costs, economies of scale, access markets, extend brand.
|One business buys another firm.
|Reduce competition, improve economies of scale, talent & knowledge.