Conglomerate merger
Involve firms engaged in unrelated types of business activity. Among conglomerate mergers, three types have been distinguished: (a) product extensions which broaden the product lines of firms (concentric mergers), (b) geographic market exentions which involves two firms whose operations have been conducted in non-overlapping geographic areas and (c) pure conglomerate mergers which involve unrelated business activities. |
Similar financial terms
ConglomerateA firm engaged in two or more unrelated businesses.
Merger
Refers to negotiations between friendly parties who arrive at a mutually agreeable decision to combine their companies. In practice, one part might be stronger and dominate the negotiations.
Horizontal merger
Involves two firms that operate and compete in the same kind of business activity. Forming a larger firm may have the benefit of economies of scale. Horizontal mergers are regulated by the government for possible negative effects on competition. They decrease the number of firms in an industry, possibly making it easier for the industry members to go into cartels for monopoly profits.
Vertical merger
Occur between firms in different stages of production operation for many reasons: (a) avoidance of fixed costs such as heating, storage, transportation, (b) eliminate cost of searching for prices, contracting, payment collection, communication, advertising and coordination and (c) more efficient information flow and better planning for inventory. Uncertainty over input supply is avoided by backward integration which reduces to the fact that long-term contracts are difficult to write, execute, an ...
Horizontal merger wave (1895-1904)
The first merger wave began right after the 1883 depression in a period of rapid economic expansion. The combination movement consisted mainly of horizontal mergers, which resulted in high concentration in many industries, including heavy manufacturing industries. Accomplished with this merger wave was the completion of the transcontinental railroad system, the advent of electricity and a major increase in the use of coal. The completed rail system resulted in the development of a national econo ...
Limitation on merger, consolidation, or sale
A bond covenant that restricts in some way a firm's ability to merge or consolidate with another firm.
