A Merger can be defined as a Voluntary amalgamation of two firms on roughly equal terms into one new legal entity. Mergers are effected by exchange of the pre-merger stock (shares) for the stock of the new firm. Owners of each pre-merger firm continue as owners, and the resources of the merging entities are pooled for the benefit of the new entity. If the merged entities were competitors, the merger is called horizontal integration, if they were supplier or customer of one another, it is called vertical integration.
There are many advantages that would arise from a merger between Flinder Valves and RSE International. FVC produces very technically complex products for the aerospace and defence industry which include many of the simple products produced by RSE. This would create a strategic benefit between the companies since their products are complements of each other. RSE has divisions that produce products for industries such as: aerospace propulsion and control systems, nautical navigation assemblies, and components for missile and fire-control systems. RSE could further develop these divisions with the addition FVC’s team of advanced engineers who have extensive experience in these areas.
RSE can also benefit FVC’s strong management team who greatly valued technological advances through research and development. Both companies have fairly new manufacturing plants with state of the art machinery. Both companies have adequate access to railways for transportation of product, in addition FVC owned a fleetof trucks.
Financially, both companies are experiencing recent rapid growth in share price due to strong performance despite the weak economic environment. Both companies are already tough competitors in the respective fields due to their unique characteristics and a merger would create great synergy between the two companies. Despite all the advantages there are a few disadvantages surrounding the merger. There seems to be a lack of