The main criteria for the classification of mergers and acquisitions (M&A) process include the type of integration of the companies, the location of the companies, the attitude of management and the conditions on which the merger and acquisition is performed.
The type of the company’s integration:
- - Horizontal merger
- - Vertical merger
- - Conglomerate merger
The form of M&A financing:
- - Internal funds
- - Borrowings
- - Partially internal and partly borrowed funds
The location of companies (geographical parameter):
- - Local
- - Regional
- - National
- - International
- - Transnational
The management's attitude to the M&A transaction:
- - Friendly
- - Hostile
The type of the buyer:
- - Strategic
- - Financial
The type of the company's integration. By this parameter, all M&A transactions are divided into horizontal, vertical and conglomerate. Horizontal merger is characterized by a union of enterprises in one industry that produce similar products. As a result of such a merger the market shares of the companies unite which leads to the growth of the number of existing and potential customers, as well as the total volume of goods and services sales.
Vertical merger means a union of companies from different industries, which are interconnected by the production of the final product. The buying company thus seeks to expand its activity through the purchase of one or more of its counterparties, thereby extending its vertical integration. Unlike in horizontal mergers, vertical consolidation rarely requires approval of the antimonopoly authorities as there is no significant increase in the market share and no limitation of competition. However, due to the vertical merger it is possible to reduce operating costs, to use limited resources more economically and to increase the added value of the final product.
Conglomerate merger is a merger of companies unrelated by production or marketing relationships. Among the reasons for the merger of these companies may be the expansion of the product line of not competing goods or acquisition of new additional channels of sales.