Mergers and Acquisitions Paper Research Example | Topics and Well Written Essays - 1500 words

Mergers and Acquisitions - Research Paper ExampleBy this process, the merging companies aim to enhance their long barrier profitability by expanding their operations. In contrast, acquisitions occur between the bidding federation and the target company and it whitethorn be either hostile or friendly. on a lower floor acquisition, a great deal it is seen that bidding company purchases the assets of the target company. There are several types of M&A and the mode is chosen according to the nature, market go under, and requirements of concerned companies. This make-up will examine five types of M&A such as swimming, vertical, congeneric, conglomerate and spin-offs using recent examples. 1. Horizontal M&A In the miscue of a horizontal M&A, two competing companies merge together so as to take advantage of its same product lines and markets. This strategy reinforces the market position of the integrated firm since the large scale production considerably minimizes the cost of produc tion and thereby increases the profitability. It is precise that the large scale operations will for certain increase the market reputation of the integrated firm which would in turn enable the firm to negotiate successfully with its suppliers and buyers. In the opinion of Frensch (2007), a horizontal M&A aids the integrated firm to divide the labor among different large organizational units effectively. Merger between Daimler- Benz of Germany and Chrysler Corporation of United States is a good example for horizontal mergers. 2. Vertical M&A Zain (2008) states that a customer-company or company-supplier relationship is reflected when two companies are merged under vertical M&A concept. Scholars opine that vertical M&A mitigates market uncertainties and thereby promotes decrease in transaction costs. According to Buhner (as cited in Frensch, 2007, p. 46), these transaction cost may include search and information cost, contract conclusion cost, quality control cost, and administratio n and taxation costs Amalgamation of Apple with Intel can be termed as a vertical merger. 3. Congeneric M&A Congeneric M&A is a merging strategy where two companies in the same or related industries offering different product lines merge together. In other words, these companies would not have common customer or buyer. Under congeneric M&A, it is observed that the merging companies may share similar distribution channels. A well popularized congeneric merger is Citigroups acquisition of Travelers Insurance. 4. Conglomerate M&A A conglomerate M&A refers to the merger of two organizations that are engaged in totally unrelated business operations. In most cases, the merging companies would be operating in different geographical areas. It is a best available strategy for extending business territories and extending product ranges. However, it is noted that conglomerate mergers occurs rarely as a result of strategic failures. It has been identified that Kelsos acquisition of Nortek was a conglomerate merger. 5. Spin-offs Under this technique, an existing business division of a parent company distributes new shares so as to create an independent company. It can be reflected as a type of divestiture. Business houses wishing to reshape their structure often sell less productive businesses as spin-offs. Factors leading to M&A activities From the above discussion, it is easy to analyze the benefits of different mergers and acquisition strategies. It is found that severe contestation is the major reason that often causes amalgamation