Merger ,also known as amalgamation , is defined as the combination of two or more companies into a single company ,were one survives with its name and the others lose of their corporate existence .According to the oxford dictionary ,merger means combing of two commercial companies into one and amalgamation means two or more business concerns into one .All the assets and liabilities of the merger company gets transferred to the surviving company .An example of this amalgamation in the Indian banking sector id the merger of global trust bank ltd with oriental bank of commerce.
Mergers are well recognized commercial practices for growth and diversification of manufacturing, business and service activities .Following characteristics motivate mergers-
a)Diversify the areas of activities , achieve optimum size of business.
b)remove certain key factors and other bottlenecks of input supplies
d) serve the customer better
e)achieve economic of scale and size ,internal and external
f) acquire assets at lower than the market price
g)bring separate enterprises under single control.
h) grow without any gestation period and nurse a sick unit and get tax advantages by acquiring a running concern .
Types of merger
There are four types of merger viz, horizontal mergers, vertical mergers , concentric mergers and conglomerate mergers. Horizontal mergers normally involve the merger of two or more companies which are producing similar products or rending the same type of services i.e. products or services which compete directly with each other .This type of merger normally results in reduction in the number of players in that particular industry and may reduce or eliminate competition .Vertical mergers involve the merger of two companies, where one of them is an actual or potential supplier of goods or services to the other. The object f this kind of merger could be to ensure a source of supply or an outlet for products and the effects may improve efficiently .
In concentric or congeneric mergers , the two companies may be related through the basic technologies production process or markets. The merged company provides an extention of products line, market participations or technology to the surviving company. Such mergers provide greater opportunities to diversify into a relative market having higher return tan it enjoyed earlier. Conglomerate mergers neither constitute the bringing together of competitors nor have a vertical connection .It involves a predominant elements of diversification of activities .Thus in this kind of merger, one company derives most of its revenue from a particular industry ,acquiring companies operating in other industries with a view to obtain greater stability of earning through diversification or to obtain benefits of economies of scales.
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