Merger is a tool used by companies for the purpose of

expanding their operations. Usually, mergers occur in a

consensual setting. Merger means integration of two entities
into one. The various purposes of a merger are to increase
the long-term profitability of the merging entities, increase
its market share, lower operating costs, expand into new
locations and connect commonplace items.
 Horizontal merger
Horizontal mergers take place where the two merging companies produce similar product in the same industry. A
horizontal merger is when two companies competing in the same market merge or join together. 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. If
a small local restaurant were to horizontally merge with another local restaurant, the impact of this merger on the food
and beverages market would be insignificant. In a large horizontal merger, however, the resulting ripple effects can be
felt throughout the market sector and sometimes throughout the whole economy.

Example: Merger of Vodafone India and Idea Cellular Limited, two telecommunication companies, is a classic
example of a horizontal merger. Another example of horizontal merger is the merger between Zee
Entertainment Enterprises Limited and Sony Pictures Networks India, two of the biggest media companies in
India, competing in the same market.
Vertical merger
Vertical mergers occur when two companies, each working at different stages in the production of the same
good, combine. A vertical merger can harm competition by making it difficult for competitors to gain access to
an important component product or to an important channel of distribution. For example, if a manufacturer were
to merge with a distributor of its products, such merger would have a huge impact on the other manufacturers
and distributors belonging to the same sector.

Example: Merger between Zee Entertainment Enterprises Limited Ltd. (ZEEL), a broadcaster, and Dish
TV India Limited, a distribution platform operator is an example of vertical merger as both the entities
are at different stages of the production/supply chain.
Congeneric merger

Congeneric mergers occur where two merging firms are in the same general industry, but they have no mutual
buyer/customer or supplier relationship. It is the merger of two companies that have no related products or
markets. In short, they have no common business ties. The rationale behind such merger is usually
diversification of risk.

There are two types of a conglomerate merger:

i. A pure conglomerate merger involves companies that are totally unrelated and that operate in distinct
markets.
ii. A mixed conglomerate merger involves companies that are looking to expand product lines or target
markets.
Example: Merger between Thomas Cook India Limited and Sterling Holiday Resorts (India) Limited
is an example of a congeneric merger as both the companies were involved in the tourism industry,
but their customer-bases and process chains were unrelated.
Market-extension merger
A market-extension merger is a merger between companies that sell the same products or services but that
operate in different markets. The goal of a market-extension merger is to gain access to a larger market and thus
ensure a bigger customer base.

Example: Merger between Mittal Steel and Arcelor Steel, a Luxembourg-based steel company, is an
example of market-extension merger.
Product-extension merger
A product-extension merger is a merger between companies that sell related products or services and that
operate in the same market. It is important to note that the products and services of both companies are not the
same, but they are related.

Example: India hasn't seen this kind of merger. However, from across the globe, a classic example of such
merger is PepsiCo's merger with Pizza Hut. Both companies worked in the same sector i.e., food and
beverages industry, and sold related but not the same products.
Acquisition and its classification

Acquisition usually refers to a larger commercial entity acquiring a smaller company. In a broad sense,
acquisition refers to acquiring company ownership wherein, one company purchases another outright. It is the
acquisition of a controlling interest in the share capital of another existing company by one corporation.
•There are two basic forms of acquisitions:
a. Stock purchase
In a stock purchase, the acquirer pays the target firm's shareholders cash and/or shares in exchange for
shares of the target company. Here, the target's shareholders receive compensation and not the target.
b. Asset purchase
In an asset purchase, the acquirer purchases the target's assets and pays the target directly.
 Advantages of M&A

a. Unlocking synergies
The common rationale for M&A is to create synergies in which the combined company is worth more
than the two companies individually. Synergies can be due to cost reduction or higher revenues. Cost
synergies are created due to economies of scale, while revenue synergies are typically created by cross-
selling, increasing market share, or higher prices. Of the two, cost synergies can be easily quantified and
calculated.
b. Higher growth
M&A enables a company to achieve higher revenues and attain faster growth, though inorganically, as
compared to growing organically. A company can make use of an aggressive M&A strategy by merging
with or acquiring another company with the latest capabilities, thus saving itself from the cost and risk
of developing the same internally.
c. Stronger market power
In horizontal and vertical mergers, the resulting entities attain a stronger market power, resulting in
power to influence prices and be more in control of its supply chain.
a. Diversification
M&A help companies to have more revenue streams, thereby enabling them to
spread risk across those revenue streams, rather than having it focus on just one. When
one revenue stream falls, an alternative stream of revenue may hold, or even pick up,
diversifying the company's risk in the process.
b. Tax benefits
M&A can sometimes lead to tax benefits if the target company is in a strategic industry
or a country with a favorable tax regime. Further, acquiring a company with net tax
losses enables the acquiring company to use the tax losses to lower its tax liability.
c. Geographical or other capital investment
M&A is aimed to smooth a firm's earnings outcomes, which in turn smooths the stock
price over time, providing conservative investors more confidence in the company.
This in turn offers the company new sales opportunities and new areas to explore the
possibility of their business.
Biggest M&A in India, in recent times:

a. Zee Entertainment – Sony India Merger

•Two of India's largest media companies, Zee Entertainment Enterprises Limited and Sony Pictures Networks
India, have agreed to a multibillion-dollar merger. The arrangement has the potential to turn the merged entity
into one of the largest and most sought-after in the country. Both companies are expected to benefit from the
merged entity and the synergies produced between them, which will not only accelerate business growth but
will also allow shareholders to participate in its future success.
b. Vodafone and Idea Merger
•The 2G Scam and the entry of Reliance Jio pushed various established companies in the telecommunication
sector to the brink of exit from the Indian market. Greatly affected by the cheap plans offered by Reliance Jio, a
price war ensued in the telecommunication sector. As the telecom business became increasingly competitive,
Vodafone India and Idea Cellular Limited, two of the then biggest companies, struggled. Both these companies
decided to merge into one single entity. It was a beneficial agreement for both Idea and Vodafone. Vodafone and
Idea launched its new corporate identity, 'Vi,' which marked the culmination of the two businesses' unification.
This merger is estimated to be worth $23,000,000,000/- (United States Dollar twenty-three billion only).
c. Hindustan Unilever Limited's and GlaxoSmithKline Consumer Healthcare
Ltd Merger
•Hindustan Unilever Limited ("HUL") is the country's leading fast-moving consumer
goodscompany. HUL announced its merger with GlaxoSmithKline Consumer Healthcare
Ltd in December 2018. The merger is in line with HUL's aim of exploiting the megatrend
of health and wellness to establish a sustainable and successful foods and refreshment
business in India. The overall business is valued at INR 3,17,00,00,00,000/- (Indian Rupees
three hundred and seventeen billion only) in this transaction.
d. Bharti Infratel and Indus Towers merger
•Bharti Infratel, a telecommunications infrastructure company, merged with Indus Towers,
India's largest mobile tower installation company, in 2020, to create a mega tower company
by the name of Indus Tower Limited. The debt-ridden Vodafone Idea received about INR
3,760,00,00,000 (Indian Rupees three thousand seven hundred and sixty crore only) cash
for its 11.15% (eleven decimal one five percent) holding in Indus Towers.
e. Bank of Baroda and Vijaya Bank and Dena Bank merger
•Vijaya Bank and Dena Bank merged with Bank of Baroda in 2019. Bank of Baroda, in
December 2020 said that it had successfully integrated 3,898 (three thousand eight
hinders and ninety eight) branches of Vijaya Bank and Dena Bank.
f. Flipkart and eBay India merger
•E-commerce major Flipkart merged with eBay India's operations in 2017. The purpose
of the merger was to provide customers of Flipkart expanded product choices with the
wide array of global inventory available on eBay while eBay customers would have
access to a more unique Indian inventory from Flipkart sellers.
g. Arcelor and Mittal Merger
•Mittal Steel merged with Arcelor Steel, a Luxembourg-based steel company. 'ArcelorMittal,' the new
corporation, is now the world's largest steel company. Mittal Steel chairman Lakshmi Mittal initiated a
hostile offer for Arcelor in January 2006. After a long battle, the two businesses united to form the
world's largest steel company, controlling 10% (ten percent) of the global steel market. The transaction
was worth $38,300,000,000/- (United States Dollar thirty-eight billion three hundred million only).
h. Tata group's acquisition of Air India
•Tata group acquired Air India in January 2022 through its subsidiary Talace after making a successful
bid of INR 18000,00,00,000/- (Indian Rupees eighteen thousand crore only) for 100% stake in Air
India. This acquisition could be a part of Tata group's strategy for aviation business as the group also
holds a majority interest in AirAsia India and Vistara, a joint venture with Singapore Airlines.
l. Walmart's acquisition of Flipkart
•Walmart's purchase of Flipkart marked its entry into the Indian market.Walmart defeated Amazon in a bidding war and paid
$16,000,000,000/- (United States Dollar sixteen billion only) for a 77% (seventy seven percent) stake in Flipkart. This helped
Walmart compete with Amazon in one of its key markets. Flipkart's logistics and supply chain network grew as a result.
m. Zomato's acquisition of UberEats
•Zomato, an online food delivery and restaurant discovery platform, has purchased the Indian operations of Uber Eats, Uber's food
delivery service, for roughly $350,000,000/- (United States Dollar three hundred and fifty million only). The decision was
intended to reduce losses in the Uber's food delivery service in India.
n. Zomato's acquisition of Blinkit
•With an aim to enter the quick market space to deliver groceries online, Zomato is set to acquire quick commerce setup, Blinkit,
formerly Grofers in an all-stock deal worth INR 4,448,00,00,000/- (Indian Rupees four thousand four hundred and forty-eight
crore only). With this acquisition, Zomato will get access to the 400 dark stores of Blinkit. Moreover, the acquisition of dark stores
aligns with the online food aggregators' newly launched app 'Zomato Instant' which promises food delivery within 10 minutes.
o. Tata Motor's acquisition of Jaguar's Land Rover
•Tata Motors Ltd., located in India, announced in June 2008 that it had completed the acquisition of the two historic British brands
Jaguar and Land Rover from Ford Motors, based in the United States, for US$ 2,300,000,000/- (United States Dollar two billion
three hundred million only). It allowed a struggling Ford to get rid of two loss-making vehicle divisions. This acquisition provided
the company with access to high-end vehicles, as well as the opportunity to add two legendary luxury brands to its roster and a
global presence.
M&A is really confirmed to be one of the most useful methods to
overcome current difficulties and improve the development of companies.
Restructuring of business largely through M&A, operation at a greater
scale, and other synergy effects seem to have helped the domestic
companies to enhance their efficiency and competitiveness in international
market. On the other hand, entry of the foreign companies through M&A
seems to have raised competitive pressure in the domestic market forcing
the firms to boost their competitiveness.