With new business market saturation expected to occur over the next five years, businesses should consider whether a merger is their optimal exit strategy.

Company mergers differ according to the industry function, the purpose of the transaction and the existing relationship, if any, between the companies. Mergers often require a significant investment of time in the new business’ future, meaning now is the time to investigate the available options. Below are five commonly-referred to types of business mergers:

Conglomerate

An amalgamation between firms that conduct unrelated business. This can be further separated into pure and mixed mergers. Pure mergers have no commonality and mixed mergers are firms who wish to expand upon their market regions or products.

Horizontal

A merger between companies within the same industry. These mergers are common in smaller, more competitive markets. The aim is to create a greater market share with lowered manufacturing costs.

Market extension mergers

This type of merger occurs between two firms that have the same products within separate markets. Amalgamating in this manner is to make a conscious effort to access a larger market.
Product extension mergers

Two firms that operate within the same market with similar products may look to product extension. This enables access to a larger set of consumers, ideally resulting in higher profits.

Vertical merger

Vertical mergers are commonly seen when two separate companies produce goods or services for a common product. The end goal is synergy, where the value and performance of the companies will increase as a result of the merge.

With growing concern that there will not be enough buyer demand to absorb the predicted volume of supply, businesses should begin to consider whether a merger is their most profitable move.