It took place during the biggest bubble the stock market had ever experienced, and it marked the final triumph of the internet over the old media. Or so it seemed at the time. Together they would form, in the words of their press release:
The firms that agree to merge are roughly equal in terms of size, customers, scale of operations, etc. For this reason, the term "merger of equals" is sometimes used. After a merger, shares of the new company are distributed to existing shareholders of both original businesses.
Deal making continues to be a popular way to grow revenue and earnings for companies of varying size. Types of Mergers There are five main types of company mergers: This is a merger between two or more companies engaged in unrelated business activities.
The firms may operate in different industries or different geographical regions.
A pure conglomerate involves two firms that have nothing in common. A mixed conglomerate, on the other hand, takes place between organizations that, while operating in unrelated business activities, are actually trying to gain product or market extensions through the merger.
Companies with no overlapping factors will only merge if it makes sense from a shareholder wealth perspective, that is, if the companies can create synergy.
A congeneric merger is also known as a Product Extension merger. A product extension merger is achieved when a new product line from one company is added to an existing product line of the other company. When two companies become one under a product extension, they are able to gain access to a larger group of consumers and, thus, bigger market share.
This type of merger occurs between companies that sell the same products but compete in different markets. Companies that engage in a market extension merger seek to gain access to a bigger market and, thus, a bigger client base. A horizontal merger occurs between companies operating in the same industry.
The merger is typically part of consolidation between two or more competitors offering the same products or services.
Such mergers are common in industries with fewer firms, and the goal is to create a larger business with greater market share and economies of scale since competition among fewer companies tends to be higher. The merger of Daimler-Benz and Chrysler is considered a horizontal merger.
When two companies that produce parts or services for a specific finished product merge, the union is referred to as a vertical merger.
Such mergers are done to increase synergies achieved through the cost reduction which results from merging with one or more supply companies. One of the most well-known examples of a vertical merger took place in when internet provider America Online AOL combined with media conglomerate Time Warner.
Examples of Mergers Anheuser-Busch InBev is an example of how mergers work and unite companies together. The company is the result of multiple mergers, consolidation, and market extensions in the beer market. Ambev merged with Interbrew uniting the number three and five largest brewers in the world.
When Ambev and Anheuser-Busch merged, it united the number one and two largest brewers in the world. Due to the large number of mergers, a mutual fund emerged, giving investors a chance to profit from merged deals.
The fund captures the spread, or amount left between the offer price and trading price. The fund invests in companies that have publicly announced a merger or takeover. Since its inception inthe fund has returned an average of 6.Sep 27, · A merger between AT&T and Time Warner would be a historic deal.
For starters, it could suddenly give AT&T control over a massive number of the world's most valuable media brands. Jan 11, · A decade ago, America Online merged with Time Warner in a deal valued at a stunning $ billion.
It was then, and is now, the largest merger in American business history. The Internet, it . Implications of the AOL-Time Warner Merger Essay - Implications of the AOL-Time Warner Merger On January 11, , America Online and Time Warner completed their historic merger shortly after the Federal Communications Commission approved the deal with conditions that affect instant messaging and Net cable access.
Time Warner was the product of the uncomfortable merger between Time Inc and Warner Communications, which brought together film production, TV, music and publishing benefit. Ted Turner’s media domain (including CNN) was obtained by Time Warner in Jan 11, · (IDG) -- The biggest regulatory obstacle that the proposed merger between America Online and Time Warner may face in Washington is time itself.
The Internet giant and the . On the other side, Time Warner anxiously tried, and failed, to establish an online presence before the merger. And here, in one fell swoop, was a solution. The strategy sounded compelling.