Merger and Acquisition Types

Essay by uophxntsUniversity, Bachelor'sA+, June 2009

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IntroductionIt is often said that two heads are better than one. This is also true in business. By merging or through acquisitions, two organizations can group their resources to increase market share, beat a competitor, or create a more efficient business model. Joining forces does not happen overnight; it is process. Mergers and acquisitions are used to describe various corporate restructuring strategies. Mergers take place when two relatively equal sized companies mutually decide to pool their interests to become one jointed organization. Acquisitions occur when companies purchase another and eliminate the existence of the target as an independent entity.

Horizontal M&AA horizontal merger is when two companies competing in the same market merge or join together. When two small companies merge horizontally, the results are less noticeable, but these are very common. In a large merger, the result is a rippling effect that can be felt throughout the market sector and sometimes throughout the entire economy.

Large horizontal mergers are considered anticompetitive. A company with 15% market share can merge with another with 35% giving the combined organization control of 50% of the market and an unfair advantage over its competitors.

An example of a recent horizontal merger is Triarc and Wendy's. In September of 2008, Triarc, the parent company of Arby's Restaurant Group merged with Wendy's International, the organization which controls the Wendy's fast food chains.

Vertical M&AA vertical merger is one in which a company combines with a supplier or distributor. This type of merger can be considered anticompetitive because it often can take away supply businesses from its competition. These mergers involve a manufacturer forming a joint venture, or partnership, with a distributor. Vertical mergers make it difficult for competing companies to compete with the newly merged company because of the advantages that merger brings. The...