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Differences in Mergers - Research Paper Example

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When a horizontal merger occurs, the participant firms in the merger have similar business activity through making and selling similar products or services. For example, were the two companies of Merck and Schering-Plough to take a decision to merge, it would be a horizontal…
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Differences in Mergers
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Differences in Mergers Differences in Horizontal, Vertical, and Conglomerate Mergers When a horizontal merger occurs, the participant firms in the merger have similar business activity through making and selling similar products or services. For example, were the two companies of Merck and Schering-Plough to take a decision to merge, it would be a horizontal merger, as both the companies are in the business activity of making and selling pharmaceuticals. In horizontal merger, there is the possible consequence of reduction in the number of participant companies in a sector of business activity, which results in reduced competition. In vertical mergers also the mergers occur among companies with similar business activities, but the difference lies in the level of business activity. The merger between a manufacturing company and one of its distribution channel partners is an example of a possible vertical merger. When IBM acquired Intelliden in 2010 it is an example of another form of vertical merger. The smaller Intelliden in the business activity of automation software technology was vertically merged with the larger IBM, enabling IBM to make use of its automated software competencies, so that it did not have to create these competencies and develop the software available with Intelliden. A conglomerate merger is totally different from a horizontal and vertical merger, as it involves the merger between two companies that operate in different sectors of industrial activity. A clear example of such a merger can be seen from the merger of the financial company Berkshire Hathaway with the railroad and transportation company Burlington Northern Santa Fe (Pride, Hughes & Kapoor, 2010, p.126-127).
Literary References
Pride, W. M., Hughes, R. J. & Kapoor, J. R. (2010). Business. Eleventh Edition. Mason, Ohio: South-Western Cengage Learning. Read More
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