A company merger occurs when two legal persons or companies join their assets to form a company with the same ownership and administration, with which to continue developing the business activity.
Because the companies they are not bought and they are not liquidated, the shareholders do not receive any money for their shares, but they own a part of the shares of the new company that has the equity equivalent to the sum of the two.
Types of company mergers
According to the market segment that the competition belongs to, mergers can be:
- Horizontal: occurs when the two companies that merge are competitors and participate in the same market. They have the objective of increasing market share.
- Vertical: a vertical merger is considered when the companies that join make up different links in the production chain of a product. It is carried out with the aim of reducing production costs or eliminating the existing margins between supplier and manufacturer.
Depending on the size of the companies, the merger can be:
- Pure merger: it is the merger that occurs when two companies come together and form a new one.
- Merger by absorption: this merger occurs when one of the two companies absorbs the other.