The Woodlands

Are there Different Types of Business Mergers?

April 13, 2023

When it comes to the success of your business, two is sometimes better than one. That is the principle behind business mergers, which can offer numerous benefits to enterprises large and small.

While you most often hear about corporate mergers in the news, businesses of all sizes can make use of this process. There are different types of mergers, each of which offers its own benefits. Here are the most common and how they can help your business.

Horizontal mergers

Perhaps the most common type, a horizontal merger, involves the coming together of two different businesses that provide the same type of services and products. Combining forces can strengthen both businesses, as it increases their share in a given market. It can also save money on operational costs, which is especially attractive to businesses struggling to remain on budget as they grow.

Vertical mergers

On the other hand, a vertical merger involves two companies that contribute to the same product for customers, but during different production stages. In this case, a company that manufactures plastic components for packaging would combine with a company that produces raw plastics. Vertical mergers typically improve efficiency and prevent disruptions during the production process.

Concentric mergers

Some businesses work in the same industry but offer different types of services. A concentric merger occurs when two of these businesses combine forces to better serve customers within their industry. For example, a company that helps with digital marketing might merge with an IT company, so they can cover more of their clients’ needs with one business operation.

It is uncommon for two separate business entities to completely merge operations. In many cases, one business absorbs the resources of another, which is technically an acquisition.

Legal Considerations of a business merger

If you are considering a business merger, you probably have many questions and concerns. It is wise to consult with an attorney before you have entered into negotiations or discussed terms. An experienced mergers & acquisitions attorney can anticipate legal issues that you might encounter, offer guidance, and assist you in making the best decision for the future of your business. Please call our Houston mergers & acquisitions attorneys today for your initial consultation. We look forward to working with you.