Mergers and Acquisitions are important events in today’s business scenario. It is the phenomenon of either two or more companies coming together to form into one bigger organization or buyout of one company by another.

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2.  Mergers and Acquisitions are important
events in today’s business scenario.
 It is the phenomenon of either two or more
companies coming together to form into one
bigger organization or buyout of one
company by another.
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3.  These are business transactions in nature
involving payment for each unit of stock.
 A merger is a consolidation of two or more
companies into one, an entirely new
company.
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4.  Acquisition on the other hand is the transfer
of ownership and control of one company
from the one group of shareholders to
another.
 Leveraged buyout is observed in cases where
a large proportion of debt is used for
financing the buyout.
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5.  Mergers and Acquisitions come under three
broad categories called
◦ Horizontal
◦ Vertical
◦ Conglomerate
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6.  A Horizontal Merger is a merger taking place
between companies belonging to one
industry. The products of these companies
are close substitutes.
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7.  A Vertical Merger is a merger which takes
place between companies belonging to same
industry, but the line of business is different.
 For example, a company in the
telecommunications industry acquiring an
internet service provider.
 Or a mobile phone based company acquiring
a land phone based company.
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8.  A Conglomerate Merger is a type of merger in
which companies which are totally unrelated
coming together.
 For example, a company which is producing
heavy engineering products acquiring a 7star
chain of hotels can be considered as
Conglomerate merger.
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9.  Why do companies buy other companies or
two or more companies merge into one large
company?
 The reason is that it is very easy to exercise
market control when the amount of
competition is reduced.
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10.  Other reasons include growing economies
provide better opportunities which are best
made use only through combining
companies.
 In an economy troubled by ever-increasing
prices of raw materials, mergers and
acquisitions provide economies to scale in
production.
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11.  An entry into a new market can be made
easier by acquiring an existing company.
 In this way, the expertise of the acquired
company and the capital from the acquiring
company can produce a new product whose
cost can be very low when compared to other
products in the market.
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12.  With the above advantages, mergers and
acquisitions take place in an economy, which
can give a different shape to the industry.
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