| |
Guide to mergers
By Mansi gupta
The economy today is not stabilized. Even big companies have to confront the ups and downs that come their way. But the only thing that keeps them going is survival. They have to survive in the market and progress swiftly or gradually. One strategy to advancement is that of 'mergers' between companies. There are numerous mergers that take place locally but they do not have a great effect on the market especially the consumers. But the mergers that take place at the national or international level have a profound impact on the economies of the concerned countries.
There are different reasons behind a merger of two or more companies. But first of all there exist diverse types of mergers.
a) Horizontal Mergers- where two competing companies conjoin to form a single large company. The companies in horizontal mergers are selling the same product in the same market and so are contenders to each other. Such a merger can have a tremendous influence on the market from creating monopoly to escalating prices of the commodity. This is precisely the reason that The Federal Trade.
b) Commission that is worried about the market and the consumers keeps a hawk's eye on such mergers and at times detains the companies from merging in the interest of the people.
c) The Vertical Mergers- are the mergers between a supplier and the distributor company of the supplies. This is an anti competitive merger but can be highly beneficial to the company. It is because the distributor will no more have to pay for the manufacturing of the supplies, it gets the product at the base price. So there is good cost saving due to this. Vertical merger also rules out lot of competition from the market.
d) Market Extension Merger is between the companies selling same product but in different markets. This merger enhances the market for the two companies since they now act as one sole company.
e) Product Extension Merger is like the one between an eminent company making motor parts and another that makes their own cars. So, the companies involved here sell different but more or less the same product in the same market. This merger promotes the sale of both the companies significantly.
f) Conglomeration is a merger where the concerned companies have nothing in common to sell.
There are various reasons behind merger of companies. Like
a) Synergy factor prompts the merger of most of the companies. The synergy in business pertains to the cost saving and revenue enhancement. The companies after merger decrease the staff keeping only the skilled labor, work with a single managing director, CEO etc. So there is good outlay saving. Moreover the economy of the sale i.e. the purchasing power of the company booms after merger.
b) To increase the output and rule the market- many mergers are made with the intention to oust the competition and jointly rule the market. This presupposes healthy relations between the competing companies.
c) Mergers also take place when a company is not able to perform well due to some or the other cause like the lack of required investment in the form of capital, tremendous competition etc. In such a situation this company can merge with one its parent company or any other company that has faith in the prior goodwill of the declining company and in its potential to grow and enhance. So companies also merge in order to overcome their internal inconsistencies.
d) Many a mergers besides economically are also politically driven.
e) Acquisitions which imply taking over of one stronger company with the other weaker one are also at times veiled by the name of merger.
However, the directors who plan to merge their companies should actually contemplate over it, keeping in mind all the possible pros and cons. They must seek advice from neutral financial consultants who do are more inclined towards the welfare of the company and not their own. Their own benefit is also hidden in a merger since the wages of the employees increase with the advancement due to merger. So it is recommended to take advice from all those who are the well wishers of the company before taking any concrete step in this direction.
About the Author
Mansi gupta writes about mergers. Learn more at http://www.learnmergers.com .
Article Source: http://www.simplysearch4it.com/article/13618.html
| If you wish to add the above article to your website or newsletters then please include the "Article Source: http://www.simplysearch4it.com/article/13618.html" as shown above and make it hyperlinked. |
| Some other articles by Mansi gupta | Traveling tips in Europe
Europe has always been a dream destination for tourists. With high skyscrapers, world's most beautiful beaches and rich cultural legacy, there is nothing more to desire form a perfect getaway destination. Majority European countries have world's ...
Southern Comfort in elegant limousines
Limousines are the last word in elegant road travel. There are many services across America that run chartered services and you can charter limousines from them during your stay in the city. ...
The Importance of Multivitamins and Vitamins for Women
Whether you're trying to have a baby, already pregnant, going through menopause or worried about osteoporosis, it's worthwhile for you as a woman to consider the importance taking a multivitamin to create ...
Ma Huang - Chinese herb
Ma Huang, the native-Chinese herb used in fat-burning supplements and also known as Ephedra, has been used as a natural treatment for a variety of illnesses spanning the past five thousand ...
Hoodia - what it is, what it is used for?
Deep in the Kalahari Desert in South Africa a prickly like plant called Hoodia grows that could literally take your appetite away. Although this plant has been gathered and eaten by local habitants for probably ...
Student loan consolidation guide 101
The constantly escalating fees as well as the competition in the field of higher education have made the life of a ...
|
|
| |
|
|
|
