Company Mergers Types Manufacturer Business Sells Medical Equipment

The business world has "seen" (experienced; witnessed) many types of mergers. A "horizontal merger" "occurs" (happens) between two companies that are working in the same "field" (area; sector; industry). For example, a company that sells medical equipment in the northeast might purchase a company that sells similar medical equipment in the southwest. This allows the company to "expand" (increase; spread out) its "geographic reach" (the physical area covered by a company) and increase its "market share" (what percentage of sales are held by a particular company).

In contrast, a "vertical merger" occurs when a company "purchases" (buys) a company that produces products or offers services that are normally used by the purchasing company. For example, an auto manufacturer might purchase the company that supplies its tires. Companies participate in these types of mergers because they "anticipate" (believe will happen) that this will decrease costs. In this example, the auto manufacturer will now have access to tires "at cost" (paying only the cost of making the tires), without paying for the "overhead" (additional expenses, such as executive salaries) that was included in the price of the tires when the tire manufacturer was a separate company.

A third type of merger, called a "conglomerate merger," occurs when the buying company and the company being "acquired" (bought) are "unrelated" (not connected to each other). For example, a company that makes computer games might buy a company that provides financial advice. Conglomerate mergers are usually "intended" (planned) to "diversify" (make less risky by having many different, unrelated parts or by being in many different fields) large corporations' investments.