A merger is a business transaction in which two existing companies combine to form a new, singular legal entity. Mergers are voluntary and are done for a variety of reasons, such as reducing competition, increasing market share, introducing new products or services, improving operations, and ultimately driving more revenue. Mergers can allow enterprises to grow or downsize, and change the nature of their business or competitive position.
There are several types of mergers, including:
- Conglomerate merger: This is a merger between companies that operate in unrelated industries.
- Congeneric merger: This is a merger between companies that operate in the same industry but do not directly compete with each other.
- Market extension merger: This is a merger between companies that operate in the same industry and market but in different geographic locations.
- Horizontal merger: This is a merger between companies that operate in the same industry and market and are direct competitors.
- Vertical merger: This is a merger between companies that operate in the same industry but at different stages of the production process.
From a legal and financial point of view, both mergers and acquisitions generally result in the consolidation of assets and liabilities under one entity. A merger is the legal consolidation of two business entities into one, whereas an acquisition occurs when one entity takes ownership of another entitys share capital, equity interests, or assets.
