Mergers and acquisitions of companies are the consolidation of capital and business, which occurs at the level of macro and microeconomics. As a result of these processes, not very significant firms disappear from the market, and large ones appear in return.
A merger is a combination of several business entities in order to form a new unit in the economy. It occurs in three types:
1) Merger of assets. The owners of the companies participating in the association transfer (as their contribution) the right to control their organizations. But at the same time, companies continue to operate and retain all rights.
2) The fusion of forms. Companies combined into one are no longer legal entities and tax payers. Assets and liabilities to customers begins to manage a new, newly formed organization.
3) Joining. In this case, one of the merged companies functions as before, and the rest cease to exist, all their duties and rights are transferred to the remaining organization.
Acquisition is a transaction that is concluded with the aim of establishing control over an economic entity. It is considered to be concluded when more than 30% of the shares of the company that is being acquired are bought.
Merger : classification
The nature of the integration of firms distinguish:
1) Vertical fusion. This is an association of several companies, in which one of them supplies raw materials for the other. The cost of production, of course, in this case drops sharply, and profits, respectively, increases.
2) Horizontal merge. Combine such companies that produce the same product. Together they can develop better, competition is significantly reduced.
3) Parallel merging. Combine companies that produce products interconnected. For example, one company produces printers, and the second - paint for them.
4) Circular merger. Combine firms that are not related to each other by relations of production and marketing.
5) Reorganization - the merger of such companies that are involved in different areas of business.
Depending on how the management of the company relates to the transaction, there are:
1) Hostile mergers.
2) Friendly.
Merger : Transaction Motives
They are built on the basis of conflicts between the interests of the manager and the owner. And far from always, economic feasibility is taken into account. So, the motives are as follows:
1) The desire for continuous growth.
2) The individual motives of the manager.
3) Scale up production.
4) The desire to provide positive indicators for a short period.
Impact on the country's economy
Most economists argue that mergers and acquisitions are commonplace in a market system. Not only that, such a rearrangement is even useful to prevent stagnation and make the business more efficient. But not everyone thinks so. Some company executives argue that both takeovers and mergers do not contribute to the development of the national economy. On the contrary, they make competition unfair and the funds are not diverted to progress, but to constant defense and struggle.