Analysis of the Issues with the Merger or Acquisition of the Two Companies Free Essay Example, 2000 words

The production capacity of the merged company followed by a workforce reduction, decrease in the excess capacities and gaining market share through the competitive advantages as well as a reduction in cost by sharing administrative structure with the help of horizontal mergers (Bischoff, Sallstom Danylow, 2011). Vertical mergers occur in the companies which are operating at different stage leading to the combination of the production and value chains. There can be upstream mergers as well as downstream mergers in the vertical merger activity. Downstream mergers are more common than upstream mergers because companies need to be in a strong bargaining position. There is another factor if the suppliers are specialized in certain products or services where there is a requirement of superior expertise gaining dominance in the negotiation process. The main intention of vertical mergers is to reduce costs with the interlinked processes where more than one party is involved to gain better control over the market happenings. It also helps to cut back on transaction costs to have immediate access to resources avoiding uncertainty and minimizing contractile costs (Bischoff, Sallstom Danylow, 2011; Pikula, 1999). We will write a custom essay sample on Analysis of the Issues with the Merger or Acquisition of the Two Companies or any topic specifically for you Only $17.96 $11.86/page There are many reasons for the acquisition, some of them being financial reasons as the purchaser company expects the value of the asset will do better than the price paid for the acquisition. When a company acquires other company through stock purchase then the acquired company can continue to exist as a legal subsidiary of the acquirer.