3.2.2 Mergers & Takeovers

• Merger : when two businesses join together to form one business
• Takeover/acquisition : one business buys enough share (>50%) so they'll win the shareholders' vote (controlling interest) and absorbs that business
• Financial Rewards of mergers/takeovers:

  • increase in market share
  • synergies : (1+1 = 3) better together
  • economies of scale
  • more revenue
  • access to technologies
  • access to expertise (staff)
  • intellectual property (patents, copyright, etc)
  • new markets
  • improved distribution network
  • improved brand
• Supply chain : all firms involved in the production & sale of a product from raw materials to the customer

  • Primary sector (E.g. Cacao farm)
  • Secondary sector (E.g. chocolate manufacturer)
  • Tertiary sector (E.g. chocolate retailer)
• Horizontal Integration : combining with a company in the same sector

  • can reduce competition
• Vertical Integration : combining with a company in the same industry but in a different sector

  • can help reduce unit costs