Bruna Simoes in Business Consulting, Entrepreneurs, Business 7 d ago · 2 min read · +300

Five Types of Mergers

Summary: Discover everything you didn’t know about the types of business mergers you may encounter.

You probably have some sort of idea what a merger is, but did you know that a merger is classified based on the business types involved? There are five commonly differentiated types of business mergers. Although it is possible to argue that there are really only two types of mergers – vertical and horizontal – and that the other three types could be classified beneath these umbrellas, we will be treating them all as separate instances here. Five Types of Mergers

Horizontal Merger

These mergers happen when two businesses operating in the same industry, competing for the same consumer base, decide to merge into one. This makes the most sense for businesses that are competing because this tends to happen in industries with fewer firms, and the financial gain possible is generally much higher in these cases.

For example, when two vehicle manufacturers come together, they join their loyal customer bases, gaining them larger market share and they can combine their manufacturing efforts and likely reduce costs.


A conglomerate merger happens when two unrelated businesses merge. It seems like an unlikely scenario, but it’s likely enough that there is a term for it! Within this style of merger are two sub-categories of pure and mixed. A mixed conglomerate merger would be two unrelated businesses where one or both are looking to extend into completely different markets. A pure merger is when they have nothing in common and continue in that vein.

For example, an ice cream giant buys a burger chain. The businesses continue forward with the same competitive fields and markets that they had prior to the merger.

Production Extension

This occurs when two businesses with related products come together in order to group their products to get access to a larger consumer base. For example, if a major wireless company were to merge with a processor or high-speed chip manufacturer. Grouping their products together, with the assumption that this company would now be building their phones with these chips exclusively, will increase the value of the base product and save both companies money. They would also be more competitive in their market.

Market Extension

This happens when two companies that are in the same product, but different markets, join forces. Although they may be very similar businesses, they don’t have access to each others’ market while operating individually. Joining forces expands their consumer base.

For example, if an American bank were to merge with a Canadian bank; they are in the same market (banking) but aren’t competitors. Joining forces allows them to access both markets.

Vertical Merger

This is all about supply chain domination. During a vertical merger, the businesses involved will not be in competition with each other, or even in the same market but they still work together via a supply chain. Supply chains usually consist of transport businesses, manufacturers, etc.

For example, if Coca-Cola were to merge with Maritime Transport, now they would own the transportation company that services all of their east coast retailers. They would now have control or say over things like shipping routes and schedules, and would reduce their shipping costs.

Mergers Require Expert Consultants to be Successful

Mergers are a very interesting side of the business world. There is a lot of strategy and research done to target what the best mergers may be, and between which businesses. Mergers and acquisitions, however, can be extremely volatile in terms of success rates. Lots of merger deals fail, and the ones that succeed find the aftermath period (post-merger integration phase) very difficult. Without clear PMI plans in place a lot of mergers are unsuccessful in the long run. Seek help from consulting firms in Toronto to learn more or to receive assistance with a planned merger.

Sol Trickey 6 d ago · #1

Thanks for sharing!