Task 2: Explain different types of mergers in detail.

evaluate their advantages and

disadvantages and illustrate with real life examples

What is a merger?

A merger involves the mutual decision of two companies to combine and

become one entity; it can be seen as a decision made by two equals. The
combined business can cut costs and increase profits, boosting
shareholder values for both groups of shareholders.

What are the types of mergers?

Vertical integration:

Vertical integration occurs when firms merge at different stages of

production. There are two types of vertical integration, backwards and
forwards.

Backward vertical integration:

Backward vertical integration occurs when a firm merges with another firm
which is before the stage of production it is at, such as a car producer
buying a steel manufacturer.

Forward vertical integration:

Forward vertical integration occurs when a firm merges with another firm
that is ahead of its stage of production, such as a car producer merging with
a chain of showrooms

Horizontal integration:

Horizontal integration occurs when firms merge at the same stage of

production, such as a merger between two car producers, or two car
showrooms.
Conglomerate integration:

Conglomerate integration occurs when firms operating in completely

different markets, merge. such as a car producer merging with a travel
agency. In this case,  firms tend to retain their original names, and are
owned by a holding company.