Business mergers are the joining together of two companies. This happens when two companies can accomplish more together than they ever would separately. By combining resources, a merger helps expand the number of customers a business can reach.
When it comes to business mergers there are a few different types. They include conglomerate, product and market extension, horizontal, and vertical.
Two companies that join together despite their business activities being unrelated, are considered a conglomerate merger. In some cases, the two companies do not operate within the same industry, while in other cases, the companies are simply physically located in different areas. This is not the most common type of merger because they generally don’t go forward unless they know their shareholders will benefit from it.
Product Extension Merger
A product extension merger is different than a conglomerate because the two companies that come together share their particular industry. Under this type of merger, the products that both companies previously sold continue to be sold by the newly formed business. This not only widens their customer base, but also allows members of the companies that merged to work together, creating an even stronger company.
Market Extension Merger
When a market extension merger occurs it means two businesses joined forces that offer a particular product, but are located in different geographical areas. The reason for this merger is to help a company reach customers that they wouldn’t be able to reach otherwise. This could happen with two companies that sell the same product, even if their businesses are located in separate countries.
A horizontal merger is a type that brings competitors together to create one large business. Both companies would already be involved in the same industry in this case. When this happens, the new company has to be rebranded, and company policies are usually revised.
A vertical merger is a type that brings companies together that complement each other. As a result, the newly formed business can operate more efficiently.
To find out more about types of business mergers, please contact New Horizon Capital Funding.