Merger means “to combine”. Merger occurs by the combination
of two equal companies to become one entity. There directors are shareholders.
Acquisition means “to acquire”. Acquisition occurs when large company acquires small
firm. The name and legal structure of large company does not change. In acquisition a takeover is preplanned and orderly
mannered in which both parties strongly agreed.
Types of merger:
There are few
types of merger include:
A horizontal merger two companies compete each other and share product
lines and market.
Vertical merger: A vertical merger takes place
between two companies which are producing different good or providing different
Market extension merger: Two companies
choose different markets to sell same product.
Product extension merger: Two companies
choose same market to sell different products.
Conglomeration: In this merger the business of
both companies does not relate each other.
merge with or acquire other companies?
want to produce product at lower cost and want to increase their performance.
merging and acquiring companies have an opportunity to grow market shares.
merging and acquiring executives want to eliminate future competition to grow
crisis and lower demand of product is main reason of merger and acquire.
Some reasons merger and acquisition fail:
is poor communication between the employees of two companies having same rank.
culture differences create problem.
conflict occurs between executives and employees.
dress code and time recording procedures irritate many employees.
in human resource policies create problem and sometimes high performing
employees quit their job.
Advantages of merger and acquisition:
is increase for larger period of time and buyer power is increase.
and acquisition use innovative techniques to decrease financial risk.
merging or acquisition production of the business becomes less expensive and
will be less expensive to buy a business instead of expending their own
CEO’S can easily share their skill and knowledge.
Purpose of acquisition
The main purpose
of merger is to decline competition and increase operational efficiency and the
main purpose of acquisition is to increase development.