Mergers refer to the legal and financial processes that involve combining two or more separate companies into a single entity. In simpler terms, it is a strategic business decision where two or more organizations come together to form a new, single corporation.
Mergers are most commonly pursued by companies aiming to consolidate their resources, capabilities, and market positions to enhance their competitive advantage and overall performance. This corporate restructuring activity involves a comprehensive analysis of both companies, including their financial strengths, market presence, products or services, customer base, and overall goals.
The main objectives of mergers may vary, but they generally include expanding market share, achieving economies of scale, increasing profitability, accessing new markets or technologies, diversifying product portfolios, and reducing competition. Mergers can occur within the same industry, known as horizontal mergers, where companies operating at the same production or distribution level combine forces. They can also happen vertically, between companies in different production stages or levels within an industry, or even across unrelated industries, known as conglomerate mergers.
Mergers usually involve a series of negotiations, due diligence processes, legal documentation, and approvals from regulatory bodies. Once finalized, the merger results in the creation of a new entity or, in some cases, the absorption of one company into the other, pooling together their resources, assets, liabilities, employees, and overall operations.
