Types of M&A Transactions

What Are the Different Types of M&A Transactions?

Mergers and acquisitions are a set of measures aimed at combining two or more companies into one corporation with a single governing body, which is accompanied by the transfer of business management control from one company to another. Learn about the different types of M&A transactions in the article below.

What Should You Know About Merger and Acquisition?

Combining companies is one way to grow your business and strengthen its position in the market. However, this process has many features. Besides, it does not always occur voluntarily. In the context of the transition to the information society and increased international competition, mergers and acquisitions are the fastest and cheapest way to establish the presence of TNCs in the world’s most important markets and give them access to all kinds of resources.

Mergers and acquisitions are activities aimed at joint production and economic activities of two or more companies, with the creation of a new managing body, in order to increase profits by reducing the number of duplicating functions of employees, saving costs and the cost of procurement for the maintenance of the apparatus of employees of several companies, as well as increasing the production potential and productivity of the newly created enterprise, these transactions are abbreviated as M&A transactions.

A company can be valued objectively by examining comparable companies in the industry and using indicators. Mergers and acquisitions can be divided by type or format. Every day the company’s commercial facilities in order to achieve mergers and acquisitions processes, which is very important. Corporate mergers and acquisitions, now in business life and important elements in the economy, have become optimization of the company’s structure after the transaction involves an analysis of the activities of its divisions, the identification of duplicating functions and responsibilities of the personnel of divisions, and the preparation of recommendations for the reduction of duplicating divisions. When conducting a merger transaction, the optimization of the functions of the divisions of the participating companies.

The Main Types of M&A Transactions and Their Descriptions

In modern conditions of globalization of the world economy, tougher competition, and accelerating technological progress, the need to optimize the structure of production and ownership is becoming increasingly urgent. In this regard, the processes of mergers and acquisitions are becoming more widespread as one of the forms of business reorganization, which allows supporting the long-term development of the company.

Mergers and acquisitions take place in different areas of activity. From an economic point of view, mergers can be divided into three types, depending on whether companies are merging in the same industry or not. The main types of M&A transactions are:

  1. Horizontal mergers – two companies are in the same industry;
  2. Vertical mergers – two companies are at different stages of production (one produces a service for the second);
  3. Conglomerate mergers – companies are in unrelated industries.
  4. Generic mergers – companies produce related products (one company produces a certain product and the second – produces spare parts for the operation of this product).

Depending on the consistency of M&A transactions, friendly and hostile takeovers are distinguished. The first takes place by mutual agreement of the parties, the second – without it, when one company simply buys out the shares of the second and absorbs them. Therefore, in countries where the stock market is very developed, and takeovers occur quite often, companies began to invent various ways to protect themselves from hostile takeovers.