A merger is a combination of two firms where one is absorbed by the other completely. In this case, the company which is small compared to the other loses its identity and becomes a part of that other big company. Although, the later continues with its identity.
Merger is not like consolidation, it abolishes the merged company and the surviving company take over all the privileges, rights and liabilities of the merged company. It is a method by which the companies unify the asset ownerships, previously which was controlled by separate bodies, legally.
Mergers are of different types based on the relationships between the organizations involved. These are discussed below:
# Horizontal Merger: It involves the joining of two companies which are not competing with each other directly. That is, those companies are willing to sell the same kind of product to those customers who belong to a common market.
# Vertical Merger: Vertical merger involves the merging of a supplier and a company or a customer and a company. For example, a tyre company may merge with a rubber production company.
# Product-extension Merger: It involves combining two companies who sell different products in a common market. Those products may be related somewhat.
# Market-extension Merger: Market-extension Merger involves the merging of two firms who sell the same kind of product but in different markets.
# Conglomeration Merger: In a concentration merger, the participating companies don’t have any related markets or products. In fact, they do not possess any common business tie up.
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