Mergers and acquisitions (M&A) are part of corporate finance. It is no more than forming two companies into a big one. A merger is basically the combination of two companies while an acquisition is the purchase of one company by another. It allows the companies to grow, shrink or change the nature of their business.
There are different types of mergers:
- Horizontal merger – Two companies that are in direct competition and share the same product line and markets
- Vertical merger – A customer and a company or a supplier and company
- Market-extension merger – Two companies that sell the same products in different markets.
- Product-extension merger – Two companies selling different but related products in the same market.
- Conglomeration – Two companies that have no common business areas.
You can find more about mergers and acquisitions on Investopedia.