Forms of integration
The different forms of integration are Statutory merger, Subsidiary merger, and Consolidation merger.
Statutory merger, the acquiring company takes control of all the target assets and liabilities. this means the target company merges with the parent company. the target company does not exist after acquiring it after taking over. this kind of merger happens in case the target company is smaller as compared to acquiring company.
In the case of a Subsidiary merger, the acquiring company becomes the parent company and the target company becomes a Subsidiary company.
In case of a consolidation, both companies close their entity and come together to form a single company.
Then different types of mergers are Horizontal mergers, Vertical mergers, and Conglomerate mergers.
Horizontal merger, the two companies are in the same industrial domain which can merge.
Vertical merger, the acquiring company seeks to move up and down the product supply chain. Vertical merger can also be Forward integration and Backward integration.
Forward integration the acquiring company move up the supply chain to the consumer.
Backward integration the acquiring company move down the supply chain to gain access to the raw material of the supply chain.
Conglomerate merger, both the merging company domain are different.
What are the advantages of Merger ?
Increase in Market power
When the Market power increase due to Horizontal Merging, there will be few competitors which mean there merged company will have more market power.
Gain Access to new unique capabilities
The merged company will gain access to unique capabilities different from other companies
Company Diversification
The share holder can diversify the cash to other companies instead of investing in the same company.
Bootstrap EPS
The stake holders can benefit by gaining from EPS due to stock deals of the merger.
Incentive for Decision Maker
There will be incentive for Manager as they will gain due to merger
Tax benefit
If the one company is making profit and another company is making loss. Then there could be benefit in terms of Tax