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Overview of Business Mergers

This presentation discusses mergers, which occur when one company purchases another company of a similar size or when two companies agree to combine to achieve together what they cannot achieve alone. There are three main types of mergers: horizontal, between similar companies; vertical, between companies at different stages of production for the same product; and conglomerate, between unrelated companies. Mergers can take place through the purchase of assets, shares, exchange of shares for assets, or exchange of shares for shares. Potential benefits of mergers include economies of scale, research and development sharing, and avoiding duplication, while risks include higher prices, less choice for consumers, job losses, and diseconomies of scale.

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Ravneet Kaur
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14 views18 pages

Overview of Business Mergers

This presentation discusses mergers, which occur when one company purchases another company of a similar size or when two companies agree to combine to achieve together what they cannot achieve alone. There are three main types of mergers: horizontal, between similar companies; vertical, between companies at different stages of production for the same product; and conglomerate, between unrelated companies. Mergers can take place through the purchase of assets, shares, exchange of shares for assets, or exchange of shares for shares. Potential benefits of mergers include economies of scale, research and development sharing, and avoiding duplication, while risks include higher prices, less choice for consumers, job losses, and diseconomies of scale.

Uploaded by

Ravneet Kaur
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd

PRESENTATION ON MERGERS

PRESENTED BY: Aradhane Bhopte Ravneet Kaur


Page 1

MERGERS
A merger is a transaction that results in the transfer of ownership and control of a corporation.

When one company purchases another company of an approximately similar size. The two companies come together to become one. Two companies usually agree to merge when they feel that they can do something together that they can't do on their own.
Page 2

MERGERS
Merger

is one in which the assets and liabilities of a Company gets vested in another Company, the Company which is merged, losing its identity and the shareholders of the merged Company becoming the shareholders of the other Company. Eg: An already existing Company A merging with Company B, wherein all the assets and liabilities of Company A vests in Company B and Company A shall no longer be in existence after the merger. Moreover all the shareholders of Company A shall become the shareholders become the shareholders of Company B.
Page 3

MERGERS
Combining of two business entities under common ownership

Two firms coalesce and share resources in order to realize a common goal

Page 4

MERGERS
Parent stocks are usually retired and new stock issued

Name may be one of the parents or a combination


Page 5

Types of Mergers

Types of Mergers : Horizontal Vertical Conglomerate

Page 6

HORIZONTAL MERGER

A merger occurring between companies producing similar goods or offering similar services. This type of merger occurs frequently as a result of larger companies attempting to create more efficient economies of scale. Example:merger of two pharmaceutical companies or two toothpaste companies

Page 7

VERTICAL MERGER
A merger between two companies producing different goods or services for one specific finished product. The merger of firms that have actual or potential buyer-seller relationships.

For eg: merger of a TV manufacturing (assembling) company and a TV marketing company or merging of a spinning company and a weaving company.

Page 8

VERTICAL MERGER
Example:- An example of a vertical merger is a car manufacturer purchasing a tire company. Product of company A Product of Company B Product of company A B

Page 9

CONGLOMERATE MERGER

A merger between firms that are involved in totally unrelated business activities.
For eg: merging of different businesses like manufacturing of cement products, fertilizer products, electronic products, insurance investment and advertising agencies. L&T and Voltas Ltd. are examples of such mergers.
Page 10

Example:- A simple example

would be, American Broadcasting company (ABC) which has highest broadcasting channels joining Waltdisney that creates cartoon characters to promote cartoon channels in America.

Page 11

Ways of Merger
A merger can take place in following four ways:-

By purchase of assets.

The asset of company Y may be sold to company X . Once this is done company Y is then legally terminated and company X survives.

Page 12

Ways of Merger
By purchase of common share
The common share of company Y may be purchased by company X. When company X holds all the shares of company Y it is dissolved.

Page 13

Ways of Merger
By exchange of share for assets
Company X may give its share to stake

holders of company Y for its net assets. Then company Y is terminated by its shareholders who now holds shares of company X.

Page 14

Ways of Merger
Exchange of shares for shares
Company X gives its shares to the share holders of company Y and then company Y is terminated.

Page 15

Pros and Cons of Mergers

Pros: Network Economies Research and development. Avoid Duplication Regulation of Monopoly Other Economies of Scale

Page 16

Cons of Mergers
Cons:
Higher Prices Less Choice Job Losses Diseconomies of Scale

Page 17

THANK YOU

Page 18

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