Mergers
- Created by: Jess
- Created on: 01-12-12 18:57
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- Mergers
- When two, or more, firms agree to join together.
- Shares will be reissued at a new value
- Names are often joined together
- e.g. Lloyds TSB
- Normally both parties agree to the merge
- 1. Horizontal Mergers
- Same industry & same stage of production
- Popular in retail and banking
- Advantages
- cost savings
- shared expertise
- economies of scale
- greater market coverage
- access to new markets
- eg, overseas
- reduced competition
- synergies
- established knowledge of the market
- Disadvantages
- can be blocked
- redundancy costs
- incompatible ethics
- possible job losses
- incompatible resources
- different technologies
- Same industry & same stage of production
- 2. Vertical Merger
- Same industry but a different stage of production
- Forward Merger
- Oil Refinery > Petrol Station
- Guaranteed Outlet
- Backwards Merger
- Brewery < Pub
- guaranteed supply
- Cheaper raw materials
- no middle-man
- 3. Lateral Merger
- e.g. Cadbury - Schweppes
- A related industry but don't compete directly
- 4. Conglomerate Mergers/ Diversification
- Spreads risks
- New market completely
- When two, or more, firms agree to join together.
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