Implementing a company merger is one of the most robust business decisions that you can make when you wish to improve productivity and profits; it is the business case of the old mantra “the whole is greater than the sum of its parts.” Although there are many benefits to merging, it is an often difficult process that must be planned out at the granular level if it is to be successful.
There Are Several Kinds of Company Mergers
There’s more than one type of merger, due to the many different kinds of businesses and the attributes that are exclusive to certain industries. In fact, there is a handful:
Service/Product Extension: This type of company merger occurs when two closely related companies combine seamlessly to bring together their customer bases via allegiance to the new, merged company. Think SD card manufacturer for cameras, and data providers, for example.
The Conglomerate – Disparate Companies: The conglomerate merger represents the bridging of the widest possible gulf in the business world; the two companies of which it is comprised previously had very little in common, and usually only proceeds if an undeniable profit is expected for shareholders.
Company Mergers – Vertical: This is one of the more common mergers, and comprises two companies in which one was a manufacturer for the other, in a sense: the previous standalone company existed somewhere within the supply chain of the other. Primarily, this merger is done with an eye towards improving productivity while decreasing the costs incurred in the previous supply chain arrangement.
Expanding Into New Territory via Market Extension: In this case, the companies produce the same products or pitch the same services – but are located in different markets. For example, take a high-fashion clothing company in America, and a high-fashion clothing company in India; they may merge together to extend their markets into each others’ territories.
Horizontal Company Mergers: This tends to be the most competitive type of merger, because it involves two direct competitors in the same industry. Effectively, the resultant company will gain a larger share of the market share together than the two of them could apart.
Contact DAL Commercial Capital to learn more about financing solutions for business mergers and acquisitions.