Mergers

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  • 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
    • 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

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