K EO V ER
Merge
A
r: merger occurs when two companies
Types of
merger:
A vertical merger
Horizontal
mergers
Conglomerate mergers
A vertical merger:
A vertical merger is one of the most
common types of mergers. When a
company merges with either a supplier or
a customer to create an extension of the
supply chain, it is known as a vertical
merge or integration. An example of a
vertical merger may be a steel company
merging with a car manufacturer. The
steel company was previously a supplier
to the car manufacturer but after the
merge would be part of the same
company.
Horizontal
mergers:
Horizontal mergers are types of mergers that involve
companies in direct competition with one another.
Often horizontal mergers are considered hostile,
which means a larger company "takes over" a smaller
one in more of an acquisition than a merger. An
example of a horizontal merger in the traditional
sense is the combination of car companies Chrysler
and Daimler Benz. Both companies wanted the
merger and once combined were called Daimler
Chrysler. In the Daimler Chrysler case, there was
synergy in market share, financial obligations, and
operating costs that made the resulting company
better than the two companies had been separately.
Conglomerate
mergers:
Acquisition:
A corporate action in which a
companybuysmost, if not all, ofthe
target company's ownership stakes in
order to assume control of the target
firm.Acquisitions are often made as
part of a company's growth strategy
whereby it is morebeneficial to take
over an existing firm's operations and
nichecompared to expanding on its
own. Acquisitions are often paid in
cash, the acquiring company's stock or
TAKEO VER
In general parlance takeover also means
Definition:
Acquiring control of a corporation,
called a target, by stock purchase or
exchange, either hostile or friendly.
Kinds of Takeover:
I. LEGAL CONTEXT:
From legal perspective , takeover is of
three types:
Friendly takeover
Bail out takeover
Hostile takeover
Hostile takeover:
Hostile takeover is a takeover where one
company unilaterally pursues the
acquisition of shares of another company
without being into the knowledge of that
other company. The most dominant purpose
which has forced most of the companies to
resort to this kind of takeover is increase in
market share. The hostile takeover takes
place as per the provisions of SEBI
(Substantial Acquisition of Shares and
Takeover) Regulations, 1997.
Horizontal Takeover:
Takeover of one company by another
company in the same industry. The main
purpose behind this kind of takeover is
achieving the economies of scale or
increasing the market share. E.g. takeover
of Hutch by Vodafone.
Vertical takeover:
Takeover by one company of its
suppliers or customers. The former is
known as Backward integration and
latter is known as Forward integration.
E.g. takeover of Sona Steerings Ltd. By
Maruti Udyog Ltd. is backward takeover.
The main purpose behind this kind of
takeover is reduction in costs.
Conglomerate takeover:
Takeover of one company by another
company operating in totally diferent
industries. The main purpose of this
kind of takeover is diversification.