Mergers and Acquisitions Paper Research Example | Topics and Well Written Essays - 1500 words

Mergers and Acquisitions - Research Paper ExampleBy this process, the merging companies aim to enhance their long term profitability by expanding their operations. In contrast, acquisitions occur betwixt the bidding company and the target company and it may be either hostile or friendly. downstairs acquisition, often it is seen that bidding company purchases the assets of the target company. There are several types of M&A and the stylus is chosen according to the nature, market position, and requirements of concerned companies. This paper will examine five types of M&A such as horizontal, vertical, congeneric, conglomerate and spin-offs using recent examples. 1. Horizontal M&A In the persona of a horizontal M&A, dickens competing companies merge together so as to take receipts of its same product lines and markets. This strategy reinforces the market position of the integrated home since the large scale merchandise considerably minimizes the cost of production and thereby i ncreases the profitability. It is precise that the large scale operations will certainly increase the market reputation of the integrated firm which would in turn enable the firm to treat successfully with its suppliers and buyers. In the opinion of Frensch (2007), a horizontal M&A aids the integrated firm to divide the labor among different large organizational units effectively. Merger between Daimler- Benz of Germany and Chrysler Corporation of United States is a good example for horizontal mergers. 2. Vertical M&A Zain (2008) states that a customer-company or company-supplier relationship is reflected when two companies are merged under vertical M&A concept. Scholars opine that vertical M&A mitigates market uncertainties and thereby promotes decrease in transaction cost. According to Buhner (as cited in Frensch, 2007, p. 46), these transaction cost may include search and information cost, contract conclusion cost, quality control cost, and administration and taxation costs Amal gamation of Apple with Intel can be termed as a vertical merger. 3. Congeneric M&A Congeneric M&A is a merging strategy where two companies in the same or related industries offering different product lines merge together. In other words, these companies would not have mutual customer or buyer. Under congeneric M&A, it is observed that the merging companies may share equivalent distribution channels. A well popularized congeneric merger is Citigroups acquisition of Travelers Insurance. 4. Conglomerate M&A A conglomerate M&A refers to the merger of two organizations that are engaged in alone unrelated business operations. In most cases, the merging companies would be operating in different geographical areas. It is a best available strategy for extending business territories and extending product ranges. However, it is noted that conglomerate mergers occurs rarely as a result of strategic failures. It has been identified that Kelsos acquisition of Nortek was a conglomerate merger . 5. Spin-offs Under this technique, an animate business division of a parent company distributes new shares so as to create an freelancer company. It can be reflected as a type of divestiture. Business houses wishing to reshape their structure often sell less productive businesses as spin-offs. Factors leading to M&A activities From the above discussion, it is easy to try the benefits of different mergers and acquisition strategies. It is found that severe competition is the major reason that often causes amalgamation