## Mergers and Acquisitions (M&A)
M&A are external growth strategies used to achieve quick growth, expansion, or diversification by combining two or more organisations.
Why M&A instead of organic growth?
- Circumvents time, risk, and skill needed to build internal capabilities.
- Achieves synergy in physical facilities, technical/managerial skills, distribution, R&D.
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### Merger vs. Acquisition
| Dimension | Merger | Acquisition |
|---|---|---|
| What happens | Two+ organisations join to form a new entity | One organisation takes over another |
| Tone | Friendly, mutually agreed | Often unfriendly, forced association |
| Survival of entities | Both pre-merged entities cease; new entity formed | Acquired company ceases; acquirer continues |
| Profit rights | Owners of both pre-merged entities share profits | Acquiring company controls all operations |
| Typical context | Equals combining for strength | Financially strong overpowering a weaker firm |
| Timing | Planned, strategic | Often during recession or declining margins |
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### Types of Mergers
#### 1. Co-generic Merger
- Merging organisations are from related but non-competing industries.
- Associated through production processes, business markets, or basic technologies.
- Includes extension of product line or acquiring complementary components.
- Opportunity to diversify around a common set of resources and strategic requirements.
#### 2. Conglomerate Merger
- Organisations that are completely unrelated to each other combine.
- No linkages in customer groups, customer functions, or technologies.
- No common factors in production, marketing, R&D, or technology.
- In practice, there may be some degree of overlap in one or more factors.
#### 3. Horizontal Merger (implied context)
- Companies in the same industry and same stage of the value chain combine.
#### 4. Vertical Merger (implied context)
- Companies at different stages of the same supply chain combine.