Encyclopedia > Merger

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A merger is a business or economic term referring to the combination of two companies into one larger company. Such actions are commonly voluntary and often involve a stock swap. In many instances a merger is similar to a takeover but often results in a new company name (often combining the names of the original companies) and branding.

Mergers may be classified in several ways:

  • Horizontal mergers take place where the two merging companies both produce similar product in the same industry.
  • Vertical mergers occur when two firms, each working at different stages in the production of the same good, combine.
  • Conglomerate mergers take place when the two firms are members of different industries.

The occurrence of a merger often raises concerns in anti-trust circles. Devices such as the Herfindahl index can be used to analyze the impact of a merger on a market and what, if any, action should be taken to prevent it.

Famous mergers include:

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