Merger The combining of two or more entities into one, through a purchase acquisition or a pooling of interests.

Differs from a consolidation in that no new entity is created from a merger. Merger of two or more companies with similar product lines.

Horizontal merger- Two companies that are in direct competition and share the same product lines and markets i.e. it results in the consolidation of firms that are direct rivals. E.g. Exxon and Mobil, Ford and Volvo, Volkswagen and Rolls Royce and Lamborghini Vertical merger- A customer and company or a supplier and company i.e. merger of firms that have actual or potential buyer-seller relationship eg. Ford- Bendix, Time Warner-TBS. Conglomerate merger- generally a merger between companies which do not have any common business areas or no common relationship of any kind. Consolidated firma may sell related products or share marketing and distribution channels or production processes. Such kind of merger may be broadly classified into following:
http://legalserviceindia.com/articles/amer.htm A vertical merger is one in which a firm or company combines with a supplier or distributor. This type of merger can be viewed as anticompetitive because it can often rob supply business from its competition. If a contractor has been receiving a material from two separate firms, and then decides to acquire the two supplying firms, the vertical merger could cause the contractors competitors to go out of business (say, if General Motors were to buy up Bridgestone Tyres and Michelin Tyres). Antitrust concerns are a focal point of investigation if competition is hurt. The Federal Trade Commission can rule to prevent mergers if they feel they violate antitrust laws. Guidelines Vertical mergers involve a manufacturer forming a partnership with a distributor. This makes it hard for competing companies to compete with the newly merged company

because of the advantages that the merger brings. These benefits occur because the distributor no longer has to pay the supplier for material any longer because the supplier and distributor are now one entity. Formally, the distributor would have had to pay the supplier enough money to cover the cost of the material plus whatever the supplier charged in order to make a profit on the transaction. With the two companies merged, the distributor is free to get the material at base cost and does not have to pay any extra to another company that is looking to make a profit. This allows for the merged company to have less money tied up in production of a good. Example of Vertical Merger Vertical mergers can best be understood from examining real world deals. One such merger occurred between Time Warner Incorporated, a major cable operation, and the Turner Corporation, which produces CNN, TBS, and other programming. In this merger, the Federal Trade Commission (FTC) was alarmed by the fact that such a merger would allow Time Warner to monopolize much of the programming on television. Ultimately, the FTC voted to allow the merger but stipulated that the merger could not act in the interests of anti-competitiveness to the point at which the public good was harmed. Horizontal Mergers A horizontal merger is when two companies competing in the same market merge or join together (say, if McDonald's were to merge with Burger King). This type of merger can either have a very large effect or little to no effect on the market. When two extremely small companies combine, or horizontally merge, the results of the merger are less noticeable. These smaller horizontal mergers are very common. If a small local drug store were to horizontally merge with another local drugstore, the effect of this merger on the drugstore market would be minimal. In a large horizontal merger, however, the resulting ripple effects can be felt throughout the market sector and sometimes throughout the whole economy. Large horizontal mergers are often perceived as anticompetitive. If one company holding twenty percent of the market share combines with another company also holding twenty

percent of the market share, their combined share holding will then increase to forty percent. This large horizontal merger has now given the new company an unfair market advantage over its competitors. The amalgamation of Daimler-Benz and Chrysler is a popular example of a horizontal merger. Demergers Demergers are situations in which divisions or subsidiaries of parent companies are split off into their own independent corporations. The process for a demerger can vary slightly, depending on the reasons behind the implementation of the split. Generally, the parent company maintains some degree of financial interest in the newly formed corporation, although that interest may not be enough to maintain control of the functionality of the new corporate entity. A demerger can be seen as the opposite of a merger. With a merger, the object is to take two separate business entities and combine them to form a new corporation that is able to accomplish more than the two former entities could ever accomplish on their own. The demerger still has the same ultimate goal. However, the thought is that by splitting off a portion of the existing company into a new and separate corporate entity, the chances for success and profitability are greater than if the company remained one unit. A demerger is the opposite of an acquisition a company spins off some business it owns into a completely separate company. A demerger is usually carried out by distributing shares in the business to be spun off to shareholders of the company carrying out the demerger, in proportion to their shareholding in the original company. Demergers can have beneficial effects on the quality of management as they allow the management of demerged companies to concentrate on their core business, they make companies easier for investors to analyse (by simplifying the business) and they often demonstrate a management focus on increasing shareholder value. A demerger may be full, or partial. A partial demerger means that the parent company retains a stake (sometimes a majority stake) in the demerged business.

The motive for a partial demerger is sometimes to force the market to separately value the business that is demerged, in the expectation that this will lead to a higher sum of parts valuation of the parent company.

Hostile take over When an acquirer takes the control of a company by purchasing its shares without the knowledge of the management it is termed as a hostile takeover. Thus, when an acquirer silently and unilaterally, makes efforts to gain control of a company against the wishes of the existing management, such act amounts to hostile takeover. Hostile takeover is an attempt by outsider to wrest control away from an incumbent management. Conclusion Mergers and acquisitions have gained importance in recent times. Business consolidation by large industrial houses, consolidation of business by multinationals operating in India, increasing competition amongst domestic companies and competition against imports have all combined to spur mergers and acquisitions activities in India. 2006 will be remembered in India's corporate history as a year when Indian companies covered a lot of new ground. They went shopping across the globe and acquired a number of strategically significant companies. This comprised 60 per cent of the total mergers and acquisitions (M&A) activity in India in 2006. And almost 99 per cent of acquisitions were made with cash payments. http://www.whereincity.com/articles/legal/7085.html