Mergers And Acquisitions
Merger of two or more businesses economically and legally represents the coming together under a single structure. Result of the merger of the two businesses also ends the legal personality of the past, changes of ownership and control. The purchase is added to the other within a business process. Companies engaged in the purchase, the company would have already ended while the purchased entity.
Mergers and acquisitions can be a lot of reasons; the most important reasons are listed below;
• To take advantage of the synergy they create two different businesses under a single structure,
• Cost effectiveness, to increase the productive forces,
• Gaining strength in the sector and to increase its market share,
• Acquisition of new technologies, or ready to enter new markets, to have a new product,
• To avoid adding to other businesses within the competition,
• Sectorial or reduce financial risks.Four different mode combinations can be mentioned, they are summarized below;
1. Horizontal Mergers: Producing similar products or services, the coming together of businesses operating in similar sectors
2. Vertical Mergers: In the cases where the relationship between the two trading companies, i.e. the customer and the company, mergers are realized in the form of suppliers and businesses.
3. Strategic Merger: Actions taken to expand the product or market. A company to have its products to other businesses close to their areas of activity that may choose to purchase business. Likewise, operating in different geographic regions for the merger of the two companies enter new markets or one can purchase another.
4. Joint Merger: This takes place in the absence of any such activity or market relations between enterprises. The aim is to reduce sector risk.