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Discuss and explain five types of Mergers

Prepare a paper in which you pick a minimum of five types of M&A (Horizontal, Vertical, Congeneric, Conglomerate, Spin-offs, Divestitures, Carve-outs). In the first part of your paper, define and paraphrase each of your types of M&A.
search for at least one example of each of your five M&A's that have occurred during the last three years. From your research, examine the following for each M&A you selected:

1) What are the predominant issues driving an organizations interest in pursuing M&A activities?

2) Generally speaking, for your selected M&A activities, what has been the total value of the activities during the last three years?

3) From your selected M&A's, which one has accounted for the most value (has it been spin-offs, Leveraged Buy Outs [LBO], Divestitures, etc.)? Discuss why.

4) Which one has the least value? Discuss why.

5) Summarize the trends for your five selected activities that are apparent from your research.

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Different Types of Mergers:

Horizontal mergers:

Horizontal mergers occur when a company merges with another company who is a direct competitor in the same product lines and markets.

Example of Horizontal merger: Dow's acquisition of Rohm and Haas. The acquisition of Rohm and Haas will make Dow the world's leading specialty chemicals and advanced materials company, combining the two organizations' best-in-class technologies, broad geographic reach and strong industry channels to create an outstanding business portfolio with significant growth opportunities.

Vertical Mergers:

A vertical merger occurs when a company merges with either a supplier or a customer. For example, Indian automobile giant Mahindra and Mahindra acquired Italian Design Company G R Grafica Ricerca Design S.r.l. With this acquisition, M&M intends to develop a global design centre for the group and cater to global auto OEMs.


Selling assets, divisions, subsidiaries to another corporation or combination of corporations or individuals.


Selling corporation typically receives consideration for the assets sold
Other assets
Divestitures are typically taxable events for selling corporation (new basis for purchaser)

Example: Diversified manufacturer Leggett & Platt Inc divested its aluminum products unit. This sale "generates approximately $300 million of after-tax cash proceeds immediately and also provides potential future value in the form of a subordinated note and preferred stock. The transaction, however, did not result in a significant book gain or loss.

Spin offs:

Typically the parent corporation distributes on pro rata basis, all the shares it owns in subsidiary to its own shareholders.
No money generally changes hands
Non taxable event

Reference: http://www.kellogg.northwestern.edu/faculty/thompsnt/htm/emp-corp-restruc/divest_2001.ppt

Example: Spin-offs also help companies focus on individual businesses. A good example was the spin-off of Expedia by IAC/InterActiveCorp in August, 2005.

IAC CEO Barry Diller's pitch to shareholders was: "Separating the company into two businesses will allow IAC to do what it does best, and Expedia to pursue its pure mission as a travel company".

Reference: http://www.businessweek.com/investor/content/nov2005/pi2005113_4372_pi015.htm

Congeneric Mergers:

In a congeneric merger, the merging firms are connected through technological synergies even though they belong to different industries. Alternatively, the firms may be part of the same general industry but have different product lines.

Reference: http://www.icea.co.ke/content/mag/article.asp?mag=20&art=163

Cisco's acquisition of Webex: The financial backing of Cisco will help WebEx expand an already impressive product line that includes Web conferencing and remote access technologies.

More definitions on type of mergers:

Horizontal Merger:

This occurs when one firm combines with another in the same line of business, i.e. they produce the same type of goods or services. It is also referred to as horizontal integration. The firms compete with each other in their product markets. For instance, one computer manufacturer may acquire another. The merger between Glaxo Wellcome and SmithKline Beecham, both of which were pharmaceutical manufacturers, is an example of a horizontal merger. Horizontal mergers can create economies of scale, efficiencies and a more diversified product line. Horizontal mergers are thought to have the greatest potential anti-competitive effects because they are most likely to eliminate a competitor from the relevant market.

Vertical Merger

This is a merger between a ...

Solution Summary

Discuss and explain five types of Mergers