Thursday, 15 March 2012

Meger,Amalgamation,Acquisition/Takeover,Jointventure,Strategic Alliance Strategies

Merger Strategy :
A merger takes place two or more companies join together to form a single company.

Types of Mergers:

Horizontal Mergers:
The combining companies are of the same business.
Vertical Mergers: The joining companies are at different stages of the production process of the same product.

Concentric Mergers:
The Joining companies are from similar businesses. They however, have no buyer seller relationship.

Conglomerate Mergers:
In Conglomerate Mergers the combining companies are from unrelated or completely different businesses.

Reverse Merger:
When profit making company merges with the financially weaker company.

Merger Vs. Amalgamation :
"Very often, the two expressions "merger" and "amalgamation" are taken as synonymous. But there is, in fact, a difference.
>>Merger is restricted to a case where the assets and liabilities of the companies get vested in another company, the company which is merged losing its identity and its shareholders becoming shareholders of the other company.
>>On the other hand, amalgamation is an arrangement, whereby the assets and liabilities of two or more companies become vested in another company (which may or may not be one of the original companies) and which would have as its shareholders substantially, all the shareholders of the amalgamating companies."

Takeover Strategy :
Takeovers or Acquisitions happen when one company acquires ownership or the controlling stake in the other company.
Companies looking for rapid growth opportunities often adopt the takeover strategy.

>>Takeovers may be of two kinds, hostile and friendly.
>>Hostile takeovers, as the name suggests, are against the wishes acquired company. Friendly takeovers involve negotiation and mutual consent.

Joint Venture Strategy:
In Joint Ventures or JVs two or more companies come together and form a new entity to pursue some business activity.
It may be uneconomical for a company to pursue a business activity all alone. This is why it may go in for a JV.
In a JV, the two companies can combine their capabilities and strengths and share the business risks. This way they can overcome all difficulties and hurdles effectively.

>> JV Strategy is a Profit Motive Strategy

Strategic Alliance Strategy:
Strategic Alliance: The companies collaborate with each other to pursue a business activity. In a Strategic Alliance new company is not formed.
>>The companies remain independent after the formation of the alliance.
>>Strategic Alliances can help companies in many ways such as to get access to foreign technology and to enter new markets.
>> Strategic Alliance  Strategy is a Non Profit Motive Strategy

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