Mergers and Joint Ventures

A horizontal merger involves two companies that were initially competitors. They deal in the same line of duty and one decides to buy the other. On the other hand, a vertical merger involves two business entities that had a buyer-seller relationship. This merger can be involving a retailer and a supplier whereby one decides to by the other for the purpose of securing expansion. Nevertheless, a conglomerate merger involves two companies that were initially dealing in different types of businesses. Unlike vertical and horizontal mergers, a conglomerate merger involves companies that had no relationship in their lines of business; they were neither beneficiaries of each other nor competitors (Reddy, 2013).

Mergers differ from joint ventures in terms of their management. In mergers, two companies join to make one. In this process, one of the companies disappears while the other succeeds. The management levels of the two companies are harmonized to fit the buyer’s interests. Therefore, the company that has been bought ceases to exercise control over the activities of the merger. However, joint ventures involve collaboration of two companies to work on an external project. For instance, the companies may decide to build a third company through collective participation. Therefore, the bond between them becomes the external project while each of them continues to exercise independent management of its internal affairs. The companies involved in a joint venture still remain separate but they participate towards enabling success of the collaborative project agreed on. None of the companies in a joint venture influence the management traits of the other. They may decide to embark on marketing synergistic services in order to promote the success of each other without interfering with the internal business management. Mergers involve change of ownership while joint ventures introduce a shared ownership of an external project between two independent companies (Douma, 2013).

References

Douma, S. (2013). Economic Approaches to Organizations. London: Pearson.

Reddy, S. (2013). Mergers. Nankai Business Review International, 231-253.