Business mergers are complex financial and relationship transactions that take place when two or more businesses combine into one entity. While every business merger is different on a granular level, there are five main types of mergers commonly entered into.

According to the U.S. Department of Commerce, these main types of mergers include:

  • Conglomerates
  • Horizontal mergers
  • Market extension mergers
  • Vertical mergers
  • Product extension mergers

Conglomerate Mergers to form a larger corporate footprint

Conglomerate mergers take place when two companies whose business purposes are completely unrelated combine into one business. Conglomerate mergers are referred to as either being “pure” or “mixed”. A pure conglomerate business merger results between two companies whose products or services have absolutely no commonalities. Mixed conglomerate business mergers are those where businesses are merging in order to create market extensions or product extensions.

A Horizontal Business Merger can create an industry- leading company

When two companies that operate in the same industry come together as one, it is called a horizontal merger. Separately, these companies are seen as competitors. When they merge into one business, they have a better chance of dominating the industry, which is especially beneficial in those industries where there are few players.

Market Extension Mergers put separate markets under one roof

When the goal is to offer the same products to a larger base of clients, a market extension merger is the business merger of choice. In this scenario, businesses in the same sector but that operate in completely different markets combine into one, thus widening their client base for diversification of the base of operations.

Related products and markets combine with Product Extension Mergers

Product extension mergers bring together two companies with related products who are currently operating in the same market. This type of business merger results in an expanded customer base and a wider range of product offerings.

Vertical Merger results in greater efficiency

A vertical merger combines different companies that do not directly compete against one another but operate within the same chain of supply. An example of this would be when a manufacturer of a product merges with the manufacturer of the parts required to make the finished product.

Is your business considering a merger or require capital to proceed to the next step in your ladder of success? Contact the business finance experts at Vankeith Commercial Capital.