Mergers and Acquisitions Types

Types of Mergers and Acquisitions.

Merger and acquisition are defined as the business transaction where the control and ownership rights of companies, business units, and business organizations are either acquired by a target company or merged with the target company. There are four types of Mergers and Acquisitions – Horizontal, Vertical, Concentric and Conglomerate M&A.

Let us discuss the four types of Mergers and Acquisitions (M&A) in detail.

Mergers-and-Acquisitions-Types

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#1 – Horizontal M&A

#2 – Vertical Merger

#3 – Concentric M&A

  • Concentric merger and acquisition occur when two companies are operating in the same industry and have similar kinds of customer base but offer different types of products and services. The product can be a compliment one, but in no manner will it be the same or identical.
  • To cite an example, let us take a case where a company producing laptops merges with a company producing laptop bags. The laptop bag is an essential requirement of every laptop, but we see the product the products are different. Thus when this kind of mergers or acquisition takes place, it is called a concentric merger.
  • This kind of merger and acquisition generally occurs to support the customers to buy the product as a bundle offering instead of buying it in a different assembly. Also, it helps the company to diversify its offerings and thus generate higher returns.
  • Here the sales of one product will drive the sales of others as we see people who generally buy laptops will also be requiring a bag to carry it on the move. Thus, this leads to the generation of more profits for the company. The company turns out to be a one-stop destination for the consumers where the company offers products linked in some way or the other.
  • Usually, it is seen these companies have similar production processes and business markets. This type of merger also has to offer an extended product line. Finally, this kind of merger helps the company reduce the risk of doing business by diversifying the product line.

#4 – Conglomerate M&A

  • This type of merger and acquisition occurs when both the target company and target seeking company are different in terms of industry, product offering, and stage of production.
  • To cite an example, we can say a merger between a laptop producing company and an electric vehicle producing company. Thus, this kind of merger and acquisition occurs to completely explore new business areas by diversifying the product offerings, which reduces the amount of risk of doing business.

Conclusion

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This article has been a guide to types of Mergers and Acquisitions. Here we discuss its 4 types Horizontal, Vertical, Concentric, and Conglomerate M&A along with examples and benefits. You can learn more about from the following articles –

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