Abstract:
Mergers, acquisitions and takeovers have always kept the interest of economists alive. Mergers may prove to be beneficial depending on the strategies adopted. But it will not be right to say that all mergers have been successful. There are many reasons behind mergers and takeovers.For instance a particular company is very good at administration while some other company is good at marketing strategies or in operations. If the expertise of both the companies are amalgamated, it produces synergy. A new company is formed in the process, which has a potential much higher and superior to what the individual companies, previously had.
By applying the rules of synergy effectively, a merger can be made a success. There are many reasons behind mergers, some of them are as follows:
- Some of the mergers take place to enhance the productivity of the company and also to monopolize the market. In this kind there is a general tendency among the merging companies that both the companies together would monopolize the market thereby ousting others.
- One of the reasons behind mergers may be due to political factors.
- Cutting down expenses and increasing revenues may be two other reasons behind mergers.
- In the event when a company is not self sufficient to operate on its own. Hindrances may be in the form of insufficient investment capacity, excessive competition due to, which the company is not being able to keep pace with other companies. Under such circumstances, the subsidiaries may merge with the parent company for a better output.
Types of mergers:
Mergers may be of the following types:(A)Vertical merger
(B)Horizontal merger
(C)Market extension merger
(D)Conglomeration
(E)Product extension merger
(F)Reverse merger:
(F1)Triangular or subsidiary merger
(Fi)Forward triangular or subsidiary merger
(Fii) Reverse triangular or subsidiary merger.
