Mergers & Takeovers

• merger


  two or more companies combine to form a new company
• takeover


  one company purchases another company, often against its will
• 5 reasons why firms may choose to merge/takeover

  • strategic fit
  • economies of scale
  • synergies
  • elimination of competition
  • shareholder value
• two types of integration

  • vertical
  • horizontal
• vertical integration: a merger/takeover of a firm at a different stage in the production process
• two types of vertical integration

  • forward
  • backward
• horizontal integration: merger/takeover of a firm at the same stage of production
• problems with mergers/takeovers

  • strain on cash flow
  • increased management complexities
  • quality control issues
  • diseconomies of scale
  • culture clash