MERGERS BY MODESTAR(088978) MAPENZI GIFT. Definition of mergers  Voluntary amalgamation of two firms on roughly equal terms into one new legal entity.

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Presentation transcript:

MERGERS BY MODESTAR(088978) MAPENZI GIFT

Definition of mergers  Voluntary amalgamation of two firms on roughly equal terms into one new legal entity.  This is where two companies combine to form a new enterprise all together.  The main motive of a merge is to seek improved financial performance to reduce cost, beat competition amongst others.  A merge is also known as a consolidation.  Although merges and acquisitions are uttered in the same breath there is a difference between the two.  An acquisition is a purchase that occurs when a company takes over another and clearly establishes itself as the new owner(Takeovers).

Varieties of mergers  Horizontal mergers  Vertical mergers  Product-extension mergers  Market-extension mergers  Conglomeration

Advantages of Merges  Economies of scale  Improved market reach and industry visibility  Tax benefits  Increased investments  High competitive edge

Disadvantages of merges  Diseconomies of scale if businesses become too large which leads to higher unit costs  Clashes of culture between different types of businesses can occur hence reducing the effectiveness of the integration  Conflicts of objectives between different businesses whereby decisions are more difficult to make hence difficulties in running the business.