There is quite likely to be a point where one would want to join forces with another company to cut down expenses and boost profits. Earlier, Anand Jayapalan had discussed that one of the simplest yet effective ways to do so is to merge one’s business with another company. A merger is basically a type of agreement where two companies join together to form one new company. In case of a merger, both companies voluntarily merge with each other. Mergers can be of multiple types, such as:

• Horizontal: Horizontal merger implies to a merger between two companies that are a part of the same industry. Such a merger involves two businesses offering the same services or products to almost the same customer demographic.  The goal of horizontal mergers generally is to increase the market share and reach of the businesses by becoming a single entity. For instance, one owns a boutique and opts to merge with another boutique in town. As a result, the business will be merging with a direct competitor to form a single boutique that has a larger market share. Horizontal mergers are particularly common in industries with high competition and fewer companies.

• Vertical: Vertical mergers take place when two companies that are in the same industry but at diverse points in the supply chain merge their operations. Companies that are part of a vertical merger produce diverse types of products along the supply chain and work toward producing one final product. A good example of a vertical merger would be a company that manufactures auto parts merging with a company that supplies raw materials for auto parts. Vertical mergers are generally done to improve logistics and operating efficiency, and reduce overall expenses.

• Concentric: Congeneric or product-extension mergers take place between two companies that are in the same market but sell different but related products or services. As the companies sell different products, they are not direct competitors. Congeneric mergers enable companies to effectively group together their products or services in order to gain access to a larger set of consumers. By offering more products or services that their target audience is looking for, companies are able to attract more consumers through a congeneric merger. A catering company merging with a party planning business would be an example of a concentric merger. Both these companies are in the same industry but have different offerings.

• Conglomerate: A conglomerate merger takes place when two or more companies in varying industries or geographic locations come together to broaden their range of services and products. In a conglomerate merger, the companies involved engage in unrelated business activities. One might be a software firm, and another can be a clothing line or a financial services company. Conglomerate mergers can be of two types, pure and mixed. Pure conglomerate mergers involve two companies that have nothing in common and no similar offerings. On the other hand, mixed mergers take place between companies looking to expand their offerings or market reach by joining with another company.  A business might take part in a conglomerate merger to expand its customer base and reach a wider market.

Earlier, Anand Jayapalan had spoken about how while some companies may use a merger as a business exit strategy, there are many others who use a merger for business restructuring.