The Complete Guide on Mergers and Acquisitions Types

Mergers and Acquisitions (M&As) is a common term, especially for entrepreneurs planning to consolidate their companies or assets. The corporate world tangles with loads of activities with businesses merging and acquiring to conquer the industry. Many companies seek to diversify and dominate the market through partnerships.

Merging and acquisition is a compatible term that offers two different meanings. Merger is a company that purchases or absorbs another business to create a new one. Acquisition means a business buys some or all assets from another company. However, enterprises should review the mergers and acquisitions types to weigh what is best for their business.

Data room software incorporation to M&As

M&A involves huge financial transactions, data transfers, agreements, and loads of files. The merging and acquiring process may take months or years, meaning a consistent flow of information. Companies need to incorporate advanced technology like online data room software or virtual data rooms to help in documentation and transfers.

The data room services assist in due diligence for buyers and sellers. Organizations can utilize the services for documents, intellectual property data, financial statements, capitalization tables, employee data, and more. The acquiring company can avail legal data in secure digital platforms, thus avoiding physical data rooms. This eliminates physical damages like theft, fires, and other potential harms to the merger and acquisition of documents.

Data room comparison: What to settle for

The tech industry offers multiple virtual data room providers, each promising the best services. However, you should compare virtual data rooms against your needs before settling on any services.

To start with, it’s advisable to compare virtual and physical data rooms first.

Physical data room

The physical data rooms are set in a particular location based on the seller or business preference. The user stores the important documents required in the merger and acquisition process. The buyer and seller can access the room to review the information before striking a deal. Businesses need to store the documents in a secure location with restricted access, especially for unauthorized users.

Virtual data rooms

Virtual data rooms are an advanced version of physical rooms. They have no physical location and are accessible online through secure software and login credentials. Buyers and sellers can efficiently conduct business from anywhere without visiting the data room’s location.

The electronic data room is easy to secure, maintain and operate. The parties can access information anytime through secure log-ins.

After comparing the data rooms, organizations can check the best data rooms for their activities. What’s best for their merger and acquisition process, and how safe is the data? The parties should analyze the cost, time, management, accessibility, and workload before settling for any data rooms.

Types of mergers and acquisitions

Once the documentation and data security is settled, businesses should consider the type of M&A they need. There are various mergers and acquisition types, each offering specific pros and cons to the company. These include:

  • Horizontal merger
  • Vertical merger
  • Concentric merger
  • Conglomerate merger
  • Market and product extension mergers

Horizontal merger

The horizontal merger is quite popular. Here, two companies offer the same products in the same market and at the same production stage. They merge to dominate the market and provide similar services to their final customers. This helps scale up the economy and decrease competition in the industry.

Horizontal mergers’ common cons are that they have increased regulatory scrutiny and inflexibility. Suppose the companies don’t realize the merging value (post and pre-merger integration); the process won’t ultimately succeed.

Vertical merger

The vertical merger is slightly different from the horizontal merger process. This type of merger consists of two companies in the same industry but in different production stages. This means one partner is higher production-wise than the other — for example, a retailer and wholesaler merging an acquisition deal. The vertical merger helps with production costs, streamlining their operation process, and positively boosting the upcoming business.

The vertical merger can bring inflexibilities that lead to other management issues. Though when handled well, it can work wonders for small businesses.

Concentric merger

A congeneric merger involves two companies (acquirer and target company) that offer different services and products but are in the same market with the same customers. Their business competition is indirect through products that complement each other.

Once the two businesses merge, they create new channels in the production line, thus increasing market share. However, the merger could lead to limited diversification.

Conglomerate merger

The conglomerate merger has no similarity or attachment in the market, clients, products, or services. The businesses work on totally different lines. There are two types of conglomerate mergers:

  • Pure conglomerate merger. Here the two companies opt to merge but operate separately, each working on their own field.
  • Mixed conglomerate merger. The companies seek an attachment by expanding their product and market reach. This helps in diversifying into new markets. However, it’s challenging to incorporate different companies as some services will collide.

Market and product extension mergers

A market merger describes when two organizations join to expand their market reach. The product extension merger means when the acquirer/buyer in the M&A adds a product from the acquired company to their products.


To achieve the best merger and acquisition, businesses should analyze their goals, strategies, and needs. Based on them, they will be able to go for the merger and acquisition strategy that will drive further growth. The types of M&As highlighted in this article are:

  • Horizontal merger
  • Vertical merger
  • Concentric merger
  • Conglomerate merger
  • Market and product extension mergers

No matter what M&A type you go for, technology should be your reliable companion. And virtual data rooms, unlike their physical counterparts, are the best investment on your way to successful M&A.

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Published on November 25, 2022 by Beatrice Stefanescu. Filed under: , , .

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