Business combination shortly described for student. Created by the help of DR. monjur Morshed Mahmud , introduction to business book.
Author ,
Mushleh uddin
Student of University of Chittagong
3. Business Combination
1. Definition of Combination
2. Reason for Combination
3. Objective and Advantages of Combination
4. Disadvantages of Combination
5. Types of Combination
4.
5. When a buyer takescontrol of another business with a transaction,
it is calleda Business combination
6. IFRS:A business combination is a transactionin which the
acquirer obtains control of another business (acquire).
7. The combination of olive oil,garlic and lemon juice lifts
the sprits in winter.
YotanOtolenghi
10. DISADVANTAGES OF BUSINESS
COMBINATION
CREATION OF MONOPOLY BUSINESS
OVER CAPITALIZATION
ADMINISTRATIVE PROBLEM
ANTI-SOCIAL ACTIVITIES
THREAT TO SMALL BUSINESS
UNHOLY INFLUENCE ON GOVERNMENT
NO PERSONAL CONTACT
COSTLY MANAGEMENT
MISUSE OF FUNDS
NATIONAL INTEREST IGNORED
NON-COOPERATION
12. CompleteConsolidation
• It occurs when two or more concerns combine to transfer their assets and
liabilities to new company or when one company absorbs another’s concern
by outright purchase of its business. Complete consolidation thus means end
of separate identity of constituent units and their amalgamation into a single
unit.
Merger Amalgamation
13. Merger
• It means formation of a new company to take over the assets and liabilities
of two or more existing companies.Allthe constituents companies lose their
separate identity and their members get allotment of shares in the new
company.
14. Reasonfor merger
• Economies of scale
• Operating economies
• Synergy
• Growth
• Diversification
• Utilization of taxshield
• Increase in value
• Elimination of competition
• Better financial plannning
15. Acquisitionand takeover
• In this one company absorbs another company or companies. The
absorbing company takes over the assets of the absorbed company and
often assumes its liabilities. The identity of the absorbed company is lost
since its assets from the property of the absorbing company. The
shareholders of the absorbed company are compensated in form of
cash, shares in the absorbing company, etc. takeover is a hostile activity
where the acquisition is a friendly takeover.
16. Reasonsfor acquisition
• Increased market power
• Overcoming entry barriers
• Cost of new products development and increased speed to market
• Adequate and easy terms working capital
• Access to resourceful management
• Re-shaping the firm’s competitive scope
• Learning and developing new capabilities
17. Merger is considered to be a process
when two or more companies come
together to expand their business
operations.
An acquisition occurs when one
company
or corporation takes control of
another company and rules all its
business operations.
They are considered as amicable. They are considered as hostile.
New stocks are issued. No new stocks are issued.
The companies of same size join
hands together.
The larger companies acquire
smaller companies.
Both the companies are treated as
equal.
The company that is stronger
gets the power.
The two companies of same size
combine
to increase their strength and
financial gains along with breaking
the trade barriers.
The two companies of different sizes
come
together to combat the
challenges of downturn.
18. Horizontalcombinations
• Horizontal or parallel combination is one in which the units combined carry
on the same trade or pursue the same productive activity.
19. Features of horizontal combination
Engaged in same type of business
Dealing with same types of goods
Combines together with specific objectives
Works under single management
20. VerticalCombination
• It is also known as sequence or industry or process integration. It arises as a
result of integration of those business enterprises which are engaged in
different stage of production of a product.
21. Features of vertical
combination
may exist in same or different industry
Dealing with different types of products
Combines to ensure efficient communication
May be forward or of backward linkage integration
22. Lateralcombination
• The term lateral integration was intended to describe horizontal
integration between firms making different products but where there
was some connection either in production techniques or the finished
product itself. Hence, an entertainment corporation may wish to go into
the travel and hotel industry.
23. Conglomeratecombination
A combination is said to be conglomerate where firms dealing with related or
unrelated goods, working in forward or backward Linkage combines to work
together goods , working in forward or backward linkage combines to work
together under same management.
25. TYPES OFFEDERATION
• Pools: Pool is an association of producers producing similar types of goods. Pool is formed
through written agreement to eliminate or lessen competition among them and thus earns more
profit.
• Cartels: Apool having common sales agency is known as cartel. It is thus an output and profit pool.
Its main objectives are to control the supply of goods in the market , control price and thus maximize
profit. It is a horizontal combination.
• Trust: It is a lateral combination. To get advantages of large scale business share holders of small
companies voluntarily from an association called “Trust” where shares in full or in part of the
concerned companies are surrounded.
• Holding company: A popular & common device for combining a number of firms is the holding
company form of organization.
• Syndicate: It is an association of persons or business firms for a particular business purpose. In most
cases syndicates engage in financial transactions
