what type of merger was proposed? why do you think this type was selected? course hero

What is a merger?

Why do you think this type was selected? Here the merger proposed between the Lipton Tea Co. and Celestial Seasonings horizontal merger because both the parties were the producer of herbal teas and was from same geographical market as well. Horizontal merger is a merger between two or more companies that compete in the same business and geographical market (Cheeseman, …

What happens to competition after a merger?

Apr 05, 2012 · There are five commonly-referred to types of business combinations known as mergers: conglomerate merger, horizontal merger, market extension merger, vertical merger and product extension merger. The term chosen to describe the merger depends on the economic function, purpose of the business transaction and relationship between the merging companies.

What is a congeneric merger?

Mar 06, 2022 · 2. Tax purposes. If a firm has a lot of taxable income, it can merge with another company that has a lot of carry forward tax losses. The consolidated business's overall tax liability will be significantly lower than the tax liability of the standalone company after the merger. 3. value creation. A merger between two companies may be undertaken ...

What are the advantages of mergers?

What are the different types of mergers?

There are five commonly-referred to types of business combinations known as mergers: conglomerate merger, horizontal merger, market extension merger, vertical merger and product extension merger . The term chosen to describe the merger depends on the economic function, purpose of the business transaction and relationship between the merging companies.

What is horizontal merger?

Horizontal Merger. A merger occurring between companies in the same industry. Horizontal merger is a business consolidation that occurs between firms who operate in the same space, often as competitors offering the same good or service. Horizontal mergers are common in industries with fewer firms, as competition tends to be higher and ...

What is a conglomerate merger?

Conglomerate. A merger between firms that are involved in totally unrelated business activities. There are two types of conglomerate mergers: pure and mixed. Pure conglomerate mergers involve firms with nothing in common, while mixed conglomerate mergers involve firms that are looking for product extensions or market extensions.

What are some examples of market extension mergers?

Example. A very good example of market extension merger is the acquisition of Eagle Bancshares Inc by the RBC Centura. Eagle Bancshares is headquartered at Atlanta, Georgia and has 283 workers. It has almost 90,000 accounts and looks after assets worth US $1.1 billion.

What is vertical merger?

A vertical merger occurs when two or more firms, operating at different levels within an industry's supply chain, merge operations. Most often the logic behind the merger is to increase synergies created by merging firms that would be more efficient operating as one. Example.

What is product extension?

A product extension merger takes place between two business organizations that deal in products that are related to each other and operate in the same market. The product extension merger allows the merging companies to group together their products and get access to a bigger set of consumers. This ensures that they earn higher profits.

What are the different types of mergers?

There are five basic categories or types of mergers: 1 Horizontal merger: A merger between companies that are in direct competition with each other in terms of product lines and markets 2 Vertical merger: A merger between companies that are along the same supply chain (e.g., a retail company in the auto parts industry merges with a company that supplies raw materials for auto parts.) 3 Market-extension merger: A merger between companies in different markets that sell similar products or services 4 Product-extension merger: A merger between companies in the same markets that sell different but related products or services 5 Conglomerate merger: A merger between companies in unrelated business activities (e.g., a clothing company buys a software company)

What are the two types of conglomerate mergers?

There are two types of a conglomerate merger: pure and mixed. A pure conglomerate merger involves companies that are totally unrelated and that operate in distinct markets. A mixed conglomerate merger involves companies that are looking to expand product lines or target markets.

What is a merger contract?

It is a mutually binding contract. in which two companies join together to form one company. In other words, a merger is the combination of two companies into a single legal entity. In this article, we will look at different types of mergers that companies can undergo.

What is vertical merger?

Vertical merger: A merger between companies that are along the same supply chain (e.g., a retail company in the auto parts industry merges with a company that supplies raw materials for auto parts.) Market-extension merger: A merger between companies in different markets that sell similar products or services.

What is horizontal merger?

Horizontal Mergers. Horizontal Merger A horizontal merger occurs when companies operating in the same or similar industry combine together. The purpose of a horizontal merger is to more. is a merger between companies that directly compete with each other. Horizontal mergers are done to increase market power.

What is market extension?

A market-extension merger is a merger between companies that sell the same products or services but that operate in different markets. The goal of a market-extension merger is to gain access to a larger market and thus a bigger client/customer base.

What is a conglomerate merger?

Conglomerate Merger A Conglomerate Merger is a union between companies that operate in different industries and are involved in distinct, unrelated business activities. Conglomerate mergers are divided into pure conglomerate mergers and mixed conglomerate mergers. is a merger between companies that are totally unrelated.

What is the result of a merger?

The merger results in the addition of a new product to the existing product line of one company. As a result of the union, companies can access a larger customer base and increase their market share. 2. Conglomerate merger. Conglomerate merger is a union of companies operating in unrelated activities.

How do mergers happen?

Why do Mergers Happen? 1 After the merger, companies will secure more resources and the scale of operations will increase. 2 Companies may undergo a merger to benefit their shareholders. The existing shareholders of the original organizations receive shares in the new company after the merger. 3 Companies may agree for a merger to enter new markets or diversify their offering of products and services#N#Products and Services A product is a tangible item that is put on the market for acquisition, attention, or consumption while a service is an intangible item, which arises from#N#, consequently increasing profits. 4 Mergers also take place when companies want to acquire assets that would take time to develop internally. 5 To lower the tax liability, a company generating substantial taxable income may look to merge with a company with significant tax loss carry forward#N#NOL Tax Loss Carryforward A Net Operating Loss (NOL) or Tax Loss Carryforward is a tax provision that allows firms to carry forward losses from prior years to offset future profits#N#. 6 A merger between companies will eliminate competition among them, thus reducing the advertising price of the products. In addition, the reduction in prices will benefit customers and eventually increase sales. 7 Mergers may result in better planning and utilization of financial resources.

Why do companies seek mergers?

Summary. Companies seek mergers to gain access to a larger market and customer base, reduce competition, and achieve economies of scale. There are different types of mergers that the companies can follow, depending on their objectives and strategies. A merger is different from an acquisition. Mergers happen when two or more companies combine ...

How is merger different from acquisition?

Mergers happen when two or more companies combine to form a new entity, whereas an acquisition is the takeover of a company by another company.

What is vertical merger?

A vertical merger occurs when companies operating in the same industry, but at different levels in the supply chain, merge. Such mergers happen to increase synergies, supply chain#N#Supply Chain Supply chain is the entire system of producing and delivering a product or service, from the very beginning stage of sourcing the raw materials to the final#N#control, and efficiency.

Why is it difficult to gain synergies?

In cases where there is little in common between the companies, it may be difficult to gain synergies. Also, a bigger company may be unable to motivate employees and achieve the same degree of control. Thus, the new company may not be able to achieve economies of scale.

What happens after a merger?

After the merger, companies will secure more resources and the scale of operations will increase. Companies may undergo a merger to benefit their shareholders. The existing shareholders of the original organizations receive shares in the new company after the merger. , consequently increasing profits.

Types of Mergers

Horizontal Mergers

Vertical Mergers

Market-Extension Mergers

• A market-extension merger is a merger between companies that sell the same products or services but that operate in different markets. The goal of a market-extension merger is to gain access to a larger market and thus a bigger client/customer base. For example, RBC Centura’s merger with Eagle Bancshares Inc. in 2002 was a market-extension merger t...

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Product-Extension Mergers

Conglomerate Mergers

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Why Do Mergers Happen?

Types of Merger

• 1. Congeneric/Product extension merger
  Such mergers happen between companies operating in the same market. The merger results in the addition of a new product to the existing product line of one company. As a result of the union, companies can access a larger customer base and increase their market share.
• 2. Conglomerate merger
  Conglomerate merger is a union of companies operating in unrelated activities. The union will take place only if it increases the wealth of the shareholders.

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Advantages of A Merger

Disadvantages of A Merger

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