Mergers And Joint Ventures
Mergers and Joint Ventures
Learning Team “D”
Rebecca Adams, Thomas Elwell, Cathy Jones and Christina Najar
ECO/365 Principles of Microeconomics
September 29, 2014
Instructor: Matthew Angner
Mergers and Joint Ventures
A company does not plan on merging with another company and although some mergers are voluntary other mergers are not. When a company is struggling, having financial difficulties and has used up all of its resources sometime it is in the best interest to merge. It is important for companies to understand the different mergers and to pick the best solution. Below team D will discuss the differences between a horizontal, vertical, and conglomerate merger and how those mergers differ from joint ventures.
Horizontal Mergers
Horizontal mergers are the combining of two or more companies in the same industry that are competitors. An example would be Sirius Satellite and XM radio. The benefit of this merger is a decrease in competition for all the companies involved. The disadvantages of this merger is that a horizontal merger is considered hostile due to a larger company “taking over” the smaller company and it feeling more like an acquisition than a merger (wiseGEEK, 2014). Another drawback is the companies not requiring to disclose or share all trade secrets resulting in jealousy and/or resentment.
Vertical Mergers
Vertical mergers are more common and the companies involved in this merger do not compete directly in the same market. A vertical merger is a combination of two companies that produce different products or services and come together to produce one specific product. One of the merging companies would be the buyer of products and the other company would be the supplier (Colander, 2013). An advantage of this merger is lower costs due to the company not having to pay for the materials from the supplier. A disadvantage of this merger is forcing suppliers out of business and anti-trust issues.
Conglomerate
Learning Team “D”
Rebecca Adams, Thomas Elwell, Cathy Jones and Christina Najar
ECO/365 Principles of Microeconomics
September 29, 2014
Instructor: Matthew Angner
Mergers and Joint Ventures
A company does not plan on merging with another company and although some mergers are voluntary other mergers are not. When a company is struggling, having financial difficulties and has used up all of its resources sometime it is in the best interest to merge. It is important for companies to understand the different mergers and to pick the best solution. Below team D will discuss the differences between a horizontal, vertical, and conglomerate merger and how those mergers differ from joint ventures.
Horizontal Mergers
Horizontal mergers are the combining of two or more companies in the same industry that are competitors. An example would be Sirius Satellite and XM radio. The benefit of this merger is a decrease in competition for all the companies involved. The disadvantages of this merger is that a horizontal merger is considered hostile due to a larger company “taking over” the smaller company and it feeling more like an acquisition than a merger (wiseGEEK, 2014). Another drawback is the companies not requiring to disclose or share all trade secrets resulting in jealousy and/or resentment.
Vertical Mergers
Vertical mergers are more common and the companies involved in this merger do not compete directly in the same market. A vertical merger is a combination of two companies that produce different products or services and come together to produce one specific product. One of the merging companies would be the buyer of products and the other company would be the supplier (Colander, 2013). An advantage of this merger is lower costs due to the company not having to pay for the materials from the supplier. A disadvantage of this merger is forcing suppliers out of business and anti-trust issues.
Conglomerate
References: Chron. (2014) Retrieved from http://smallbusiness.chron.com/difference-between-mergers-joint-ventures-18578.html Colander, D. C. (2013). Microeconomics (9th Ed.). New York, NY: McGraw-Hill WiseGeek, (2014) Retrieved from http://www.wisegeek.com/what-are-the-different-types-of-mergers.htm