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 Mergers: combination of two companies to form one
 Acquisition: one company taken over by the other
 Objective: https://www.youtube.com/watch?v=30MnAxwDMJk

Due to this, M&As have their own advantages and disadvantages, but since we’re not focusing on that, let’s
move to the types of M&As.

Types of Mergers and Acquisitions: https://www.youtube.com/watch?v=iD719XQKV-o

 Horizontal: Coffee & Coffee
 Definition: brands from same industry, come together
 Objective:
 Example: flipkart and myntra, same industry, came together

 Vertical: Coffee & Its Packaging

 Definition: acquiring of another company that is down or up the value chain, so either a backward
integration, or a forward integration
 Objective: interdependency
 Example: e-commerce company x company into logistics. Since e-commerce company needs
logistics in its value chain, this becomes a vertical merger

 Congeneric: Coffee & Chai

 Definition: both are from same industry with similar consumer base but with different products
 Objective: diversify business, cross-sell products and in turn expand consumer base
 Example: both are from beverage industry with similar consumer base but with different products

 Cross Border M&A: Coffee & कॉफ़ी

 Definition: assets and operation of two firms or to
companies belonging to or registered in two different countries are combined to establish a new
legal entity.
 Objective: opportunity for Foreign direct investment, access to new markets; market expansion and new
knowledge, capabilities, and technology; complementary resources; and increasing market power
 Example:


 Cash: Coffee & Its Stocks

 Definition: after merging, shareholders are paid out by receiving cash instead of shares in
that they held in the target entity. Typically happens when the shareholders dont want
to be involved in the new merged entity
 Objective: to pay out and lay off
Example:

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 Triangular: Coffee & ___
Definition: acquirer makes a fully owned subsidiary- which is a daughter organisation of the main entity.
Purpose of subsidiary is to merge with the target entity. In this tripartite agreement, subsidiary acquires
target and target liquidates. OR subsidiary merges with target, and target remains- subsidiary ceases to exist 

 Objective: reduces taxation from acquirer’s side. And the shell company has to take most of the heat of
target liabilities, not the parent entity. So some degree of protection and cushioning is also provided.
 Example:

 Conglomerate: Coffee & Honda

 Definition: acquire a company from a different unrelated industry altogether
 Objective: to increase their market share, diversify their businesses, cross-sell their products to
respective consumer bases- hence there’s also an increase in the combined entity’s consumer base.
This is how they will take advantage of resultant synergies
A merger is when two companies voluntarily and equally- for the most part- fuse together and become one
new company. Combination of two companies forming one company, both have equal contribution while
combining.
- Explore synergies: in terms of increase in revenue & Reduction of operational costs, capital (when two
companies deal in similar type of business) so basically you're uniting resources and giving better access to
those resources.
So in turn:
Explore synergies

uniting resources and giving better access to them: consolidate or eliminate duplicate resources like a
branch and regional office, manufacturing facilities and research projects etc. 
tax benefits
- Buying out your competitors
Acquisition is a process where one business entity buys and takes over another entity, typically by
purchasing it or more than 50% of its market shares. Reasons: (2+2= >4) If a company's value is x, and
another company's value is Y. then their combined value should be more than x+y and do things that they
were NOT able to do when the were separate entities.
Results:

 Economies of scale (a proportionate saving in costs gained by increased production) will

operate as

Economies of scope (production of one good reduces the cost of producing another related good) will
operate
In turn: - Gaining instant growth
- To expand profits and area of operations
- increased market shares because company expands
but also changes in market prices. lets now discuss some of the cons of m&a
Objective obviously is to create wealth in the long term eventually. But it has some very different short term
affects on the market shares. There is a Risk on the company that is acquiring, if integration doesn't happen
properly. That's why this risk is also affected in the mkt price of the acquirer and the price goes down.

Risks:
- different work cultures
- exhaustive re-skilling due to Loss of productivity
- resultant loss of jobs. loss of jobs also can happen when the entities want to become more efficient and lay
off any liabilities. it is very counter-intuitive, and opposite to the previous point that way.
- the assets and liabilities of both entities gets combined, and suddenly company size increases, there's a
chance of diseconomies of scale.

with regards to the company that gets acquired,

probably that company wasn't doing that well and was debt-ridden or a bigger/better/cash rich entity is
acquiring it. so in long term it is getting benefitted out of it. this also reflects in the market price of the
smaller entity.