Journal: Structuring Business Combination

Business Combination Email
Student's Name
Institution
Course
Date
Business Combination Email
From: The Financial Manager
To: CEO
Date:11/11/2021
Subject: Structuring Business Combination
Business combinations often have the economic function as a major driving force, signifying that there are many economic variables to be considered during a combination. Through this email, I would like to express my economic expertise and vast knowledge on business combinations and how to structure them to help the company's top management get a clear perception of the concept.
Business combinations in simple terms can be understood as the practice of bringing together two companies to leverage the strengths of one another. A business combination can be accomplished in three general forms: mergers, acquisitions, or consolidation (Palmer, 2019). In the case of mergers, one company is completely immersed into another, and the company loses its identity as an independent entity. The two companies engaged in the combination share the stake with the acquisition, and the acquiring company takes the most shares. The companies will retain their identity as independent entities, including their names in an acquisition. A consolidation gives birth to a new company altogether, with potentially a combined or entirely new name for the child company owned by the two.
Reasons to Consider Different Types of Business Combinations
A company can consider the different types of mergers for various reasons. Companies might consider horizontal mergers to acquire competitive advantages in the same domain area (MBDA, 2012). Working independently can be harmful to the competitiveness of both companies, whereas coming together can be a source of synergy that helps dilute the competition between the two companies. On the other hand, market extension mergers combine two companies in the same industry operating in different market segments. It can be undertaken to ensure that the resultant company has a larger customer base. This type of merger brings together customers from the different market segments, leading to overall growth. Product extension mergers, which mainly focus on companies producing the same product and operating on the same market segment, also have a similar effect on market expansion and overall growth. It can also be a great move to blend the expertise from the two companies.
A vertical merger is a merger that brings together companies operating at different levels of the supply chain, offering completely other types of services or products. The motive behind vertical mergers is to leverage the efficiency resulting from having the different key players of the supply chain working as a unit (Beck & Scott Morton, 2021). Vertical mergers can also be a source of price competitiveness, as evidence suggests that they can signi...