A business merger is the joining of two business entities so that an entirely new company is formed. Most often, the two merging companies are of approximately the same size, and that’s why it’s considered a merger in the first place. If there were a gross disparity between the two companies, that would be more a case of the larger company absorbing the smaller one. There are several different types of mergers, and to survive the kind of mergers your company might go through, it will depend on exactly which type you’re involved with.
A merger is deemed a horizontal one when the two participating companies are in the same market, and they to come to an agreement to consolidate their efforts. The idea behind this type of merger is to produce a larger company which is better able to compete in that same market.
Vertical mergers occur between two companies which make parts for the same types of finished goods. These products produced do not create competition between the two companies, but there is still advantage to be gained by combining their efforts, so they can more effectively produce parts for the same finished goods assembly.
Market extension merger
This kind of merger is one which occurs between two companies that make the same product, but for two entirely different markets. When the merger takes place, the two merged entities gain access to a broader total market, and increase their combined client base.
Sometimes known as a product extension merger, this type happens between companies that operate in the same general market, and have various areas of overlap such as research and development, production processes, technology, and marketing strategies. This usually involves several product lines being brought together under one figurative roof, to create a more powerful company.
This type of merger takes place between two or more companies which are competing in entirely different markets, and which make totally different product lines. These kinds of mergers take place when there is a significant business advantage to be gained by both, in terms of their combined assets and strengths.
Your financial partner in business mergers
Business mergers usually require significant funding in order to bring about the alignment of business operations between two companies. If your company is in need of capital to execute a planned merger, contact us at Flex Capital to see if we can help you pull off the business merger that will instantly grow your business.