Merger and Acquisition in simple words are defined as a process of combining two or more Organizations together. There is a thin line of difference between the two terms but the impact of Combination is completely different in both the cases. Some Organization Prefer to grow through Merger.
Merger is considered to be a process when two or more Companies come together to expand their Business operations. In such a cases the deal gets Finalized on Friendly terms and both the Organization share profits in the newly created Entity. In the Merger two Organization combine to increase their Strengths and Financial Gains along with breaking the Trade Barriers.
On the other Hand, When one Organization take over the other Organization and control all its Business Operations, it is known as Acquisitions. In this process One financially Strong Company overpowers the weaker one. Acquisition often happens during Recession in Economy or during declining profit margins. The Combined operations then run under the name of the powerful entity. A deal in case of acquisition is often done in an unfriendly manner, it is more or less forced association where the Powerful Organization either consumes the Operations or a company in loss is forced to sell its entity.
Horizontal Merger are combination of firms engaged in the same industry. It is a merger with the direct Competitor. The Principal objective behind this type of Merger is to achieve Economies of Scale in the Production process by Shedding duplication of Installation and Functions, widening the line of Product, decreases in Working Capital and Fixed Assets investment, getting rid of competition and so on.
For example : Brook Bond Lipton India Ltd. through the merger of Lipton India and Brook Bond.
Vertical merger is a Merger of two Organization that are operating in the same industry but at the different stage of Production or distribution System. This often leads to increased synergies with the merging Firms. If an Organization take over its Supplier of Raw Material, then it leads to backward Integration. On the other hand, Forward integration happens when an organization decide to take over its buyer organization or distribution channels. Vertical merger results in many operating and financial economies.
An example of a vertical merger is a car manufacturer purchasing a tire company. Such a vertical merger reduces the cost of tires for the automaker and potentially expands its business by allowing it to supply tires to competing automakers
A notable vertical merger was the 1996 merger of Time Warner Inc., a major cable company, and the Turner Corporation, a major media company responsible for CNN, TNT, Cartoon Network, and TBS.
Conglomerate mergers are the combination of organization that are unrelated to each other. There are no linkages with respect to customer groups, Customer functions and technologies being used. There are no important common factors between the organization in Production, marketing, research and Development and Technology.
An example of conglomerate merger is L&T and Voltas Ltd. Larsen & Turbo (L&T) is the India’s largest engineering company with expertise in wide area like infrastructure, oil and gas, power and process. And Volta a Tata group company, is a major player in the electro-mechanical Engineering.