Mergers and Joint Ventures Eco 365

In: Business and Management

Submitted By lauralimccorkle
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When a company is first born the last thing on its owners mind is merging with another company. A merger is sometimes a voluntary and sometimes and involuntary transaction. If a company has found itself in a place of financial difficulty or is simply exhausted all its resources to remain open, a merger may be the only way its employees can retain their position. The alternative would be to close its doors and give up. Below we will discuss the differences between horizontal, vertical, and conglomerate mergers and how these differ from a joint venture. The first to discuss is a horizontal merger which by definition is a consolidation of two or more businesses that are in the same field and are more than likely competitors. The benefit of this for both businesses is that there is one less company to compete with in their particular field. The down side may be that the owners of each will not need to share all of their trade secrets and will need to answer to someone that previously was a competitor. This could lead to tension if there were to be any bad blood in the past that was caused from the competitive market. Unlike a horizontal merger, a vertical merger takes place when two or more companies that produce different goods or services for one specific product come together. An example of this type of merger is a lumber yard that typically supplies lumber to a finish carpentry company merge. The lumber yard sees that they can have a positive influence on this end user market by supplying lumber at a significant discount thus reducing the cost of the finish carpentry company. Both companies will benefit from this merger greatly. The first two mergers discussed involved businesses in the same general field of work or service. This is not the case with a conglomerate merger as this occurs when two or more companies come together even though their…...

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