"Types Of Mergers And Acquisitions"

*  The Type of Mergers and Acquisitions  role in Market :-

The M&A process itself is a multifaceted which depends upon the type of merging companies.

• A horizontal merger is usually between two companies in the same business sector. The example of horizontal merger would be if a health care’s system buys another health care system. This means that synergy can obtained through many forms including such as; increased market share, cost savings and exploring new market opportunities.

• A vertical merger represents the buying of supplier of a business. In the same example as above if a health care system buys the ambulance services from their service suppliers is an example of vertical buying. The vertical buying is aimed at reducing overhead cost of operations and economy of scale.

• Conglomerate M&A is the third form of M&A process which deals the merger between two irrelevant companies. The example of conglomerate M&A with relevance to above scenario would be if health care system buys a restaurant chain. The objective may be diversification of capital investment.

*  Arm's Length Mergers :-

 An arm's length merger is a merger: 

1. approved by disinterested directors and                 

2. approved by disinterested stockholders:

                ″The two elements are complementary and not substitutes. The first element is important because the directors have the capability to act as effective and active bargaining agents, which disaggregated stockholders do not. But, because bargaining agents are not always effective or faithful, the second element is critical, because it gives the minority stockholders the opportunity to reject their agents' work. Therefore, when a merger with a controlling stockholder was:

 1) Negotiated and approved by a special committee of independent directors; and

 2) Conditioned on an affirmative vote of a majority of the minority stockholders, the business judgment standard of review should preemptively apply, and any plaintiff ought to have to plead particularized facts that, if true, support an inference that, despite the facially fair process, the merger was tainted because of fiduciary wrongdoing.″

*  Strategic Mergers :-

                                             A Strategic merger usually refers to long term strategic holding of target (Acquired) firm. This type of M&A process aims at creating synergies in the long run by increased market share, broad customer base, and corporate strength of business. A strategic acquirer may also be willing to pay a premium offer to target firm in the outlook of the synergy value created after M&A process.

*  So-called 'Acqui-hires' :-

                           An acquisition is sometimes referred to as an acqui-hire when the acquiring company seeks primarily to obtain the target's staff, which may have expertise in a particular area in which the acquiring company sees itself as weak. This type of acquisition is common in the technology industry.