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Which type of merger could be right for your business?

Feb 26, 2021 | Commercial Litigation

Commonly, decisions relating to major changes to a business take much thought and consideration of the available options. Even if an opportunity seems like it could benefit a company, there are often hidden issues to uncover to ensure that the move would be the best for the situation. For example, if Florida business owners are considering merging with another company, it is essential that they understand the different types of mergers.

When considering a merger, some business owners may think that it makes sense to merge with a company that produces similar products. This type of merger is known as a horizontal merger, and business owners may believe that combining forces will allow them to pool resources and experience growth as a new company. However, horizontal mergers could come under scrutiny by the Department of Justice if the DOJ believes that the merger violates antitrust laws by creating an anticompetitive environment in the particular industry.

Other types of mergers that business owners may consider at some point include:

  • Market extension merger, which allows companies that sell the same product or service but in different markets to merge, such an out-of-country company merging with company in the United States in efforts to expand
  • Conglomerate merger, which involves the merger of two companies that do not sell similar products or services
  • Vertical merger, which involves the merger of two companies that work within the same supply chain
  • Congeneric merger, which involves the merger of two companies that sell different products or services but whose products or services compliment or work well together

Mergers can have numerous benefits for companies, but they also come with risks. In addition to risking antitrust law violations, companies could also risk losing consumers if those consumers do not see the benefit in the merger. Florida business owners will undoubtedly want to ensure that they understand the ins and outs of a merger before considering this option.