Updated: Feb 27
One of the most well-known methods of expanding your business or growing it is through mergers and acquisitions (M&A). This is simply when one business or company combines with another and becomes one single large legal entity.
In this blog Scott Ker who Business Sales Specialist will discuss the common types of mergers and acquisition and their advantages. You will discover four types of M&A and how you could one day expand your business. Here is a list of the 4 types of M&A:
Each of them has its own advantages depending on what the businesses/companies want to achieve after merging.
1. Vertical Merger
This is simple and is common in M&A. It happens when a business/company merges with another business that is higher up in the supply chain. These companies may not compete with each other but exist to win the same supply chain. The point of vertical mergers is to control the supply chain.
An auto company merging with a car parts company like a tire company would be a good example of a vertical merger. This can increase their revenue through cost-cutting measures such as sourcing raw materials at a lower cost.
2. Horizontal Merger
Horizontal mergers happen between firms that produce similar products and sell them to the same market. This is happening especially between competing companies/businesses. Their point of coming together is to increase their reach. It also happens when large businesses in the market expand by absorbing start-ups in their industry who are their competitors. This creates a larger organization with more market share.
A good example of horizontal merging is the integration of Facebook, WhatsApp, Instagram, and Messenger. They came together into one big social media company (Meta).
3. Congeneric Merger
Congeneric mergers happen when companies merging sell different products to the same market. The companies/businesses involved in this type of M&A may be indirect competitors who may share the same production process, distribution channels, marketing, or technology. They want to increase their reach and market size.
A good example of a congeneric merger is when Coke company merged with Vitamin water in 2007. This was a good decision, especially at a time when the beverage consumers were looking for options other than soda.
4. Conglomerate Merger
This is a type of (M&A) where the businesses or companies involved have nothing in common. They do this and expand into new and profitable markets that may have nothing to do with their initial markets. It occurs between firms that are in different industries or are located in different geographical locations. The point can be to extend their corporate territories and extend their product range.
An example of this merger is Amazon and Whole Foods which expanded its customer base and increased efficiency. Through diversification, the risk of loss lessens where if one sector performs poorly, the other can compensate for the loss.
What next after deciding to expand
For any business owner in Sydney, it may be tempting to try and look for other businesses to merge for their advantage. With different regulations put in place for businesses, some being severe in particular industries/sectors, connecting with an expert in the field of M&A can ease the process, making it quicker and safer. It is good to do extensive research about the other businesses before merging.
Scott is a renowned business sales specialist whose mission is to truly connect with his clients and their visions. Contact Scott Ker today for your obligation-free 30-minute appointment with to explore your best options for sale, growth, or succession.