Knowing About – Mergers, Acquisitions, and Joint Ventures

Today’s world is the world of acquisitions, mergers, and joint ventures. Most of the organizations, these days adopt either of these marketing strategies to attain their share of profitability.

However, all of us are not management students. So, when we come across terms like mergers, acquisitions and joint ventures in newspapers or business magazines, it leaves us wondering, what exactly they mean and what are the reasons for adopting such marketing strategy.

Knowing about Mergers

Two organizations are said to “Merge” when they join together and form a single organization. This means these two separate organizations, form and agree upon a set of common terms and conditions and thus works as a single operating unit. Here, both organizations give up their stock and work together to create new stock.

 

Different types of Mergers are –

Horizontal Mergers:

Is the one where both the organizations have the same nature of business?

Vertical Mergers:

Is the one where the two organizations have a common business but the production stage of their product is different?

Conglomerate Mergers:

Is the one where the two joining organizations have different nature of business?

Reverse Mergers:

Is the one where a profit-making organization merges with a weaker or loss-making organization?

Knowing about Acquisitions

“Acquisitions” also termed as “Takeovers”, is the marketing strategy where one organization acquires ownership or takes control over the other organization. It can be either –

  • Friendly takeover
  • Hostile takeover

Friendly takeovers are the ones where the takeover is done with mutual consent JCPenney credit card login. Here, the two organizations sit together and negotiate their deal. It’s a peaceful act of taking control of the other organization. While in hostile takeovers the acquisition is against the wish of the acquired organization. It’s an unwilling act of taking control of the other organization.

The basic concept for adopting acquisitions or takeovers by organizations is to attain rapid growth and profitability. So, during acquisition; a profit-making organization takes over loss or less profit-making organization.

Generally, takeovers are between an established, bigger organization and a smaller organization; wherein a bigger organization takes over a smaller organization. However, in the case of reverse takeovers, a highly profit-making smaller organization takes over a loss-making bigger organization.

Knowing about Joint Ventures

Joint Ventures or JV’s as it is commonly called is a business condition wherein two or more than two organizations come together to form a new organization. Here, the new organization formed utilizes the individual’s strengths of forming organizations to overcome the business hurdles. It does not dispose off the assets, technology and other resources of the individual organizations rather they utilize them and make use of them to their best ability. They share the expenses and profit occurred.

Every organization has its strengths and weaknesses. They may find it difficult to overcome those weaknesses and cover the risks involved. However, with JV’s, such organizations can overcome those difficulties by utilizing the strengths of the partner organization. Thus, joint ventures help two or more individual organizations to combine their strengths and capabilities to overcome various business bottlenecks.