eco365 week four group essay
Week 4: Mergers and Joint Ventures
ECO/365
August 11, 2014
Week 4: Mergers and Joint Ventures
The several different types of merger are horizontal, vertical, and conglomeration:
Horizontal merger refers to two companies that were once competitors but came together to merge into one large organization. As one large operation, they are serving the same clientele under one entity.
Vertical merger is two companies who are a manufacturer and supplier, coming together as one. The main goal in a vertical merger is to increase efficiency in the supply chain to increase profits.
Conglomeration happens when two companies that are not in the same category merge into one operation. Usually this happens when companies want to diversify their business and reach out to other categories of assets and portfolios. Joint Venture are two companies joining forces, but as two business entities, such as a collaboration. "Each company will then take an interest, both operational and financial, in the new company and their share in the profits or losses of the new venture, which will be directly linked to the level of involvement or commitment they put forth from the start" (Scheid, 2010). Joint ventures have a positive or negative effect on the companies involved. It all depends on how the collaboration is perceived. Both companies must make careful consideration and decision making to eliminate any possible negative effect it may have on the company's business.
The difference in a joint venture, the original businesses that are participating do not dissolve. In a merger, the two participating companies are now under one entity, unlike a joint venture.
Personal Experiences One family member worked for Air Tran before South West bought them, now he works for SWA or SWA Tran as they call it. It has been difficult watching him go through it. The In-Law lost some of his tenures, was demoted, and took an extreme pay cut, because of not having the
ECO/365
August 11, 2014
Week 4: Mergers and Joint Ventures
The several different types of merger are horizontal, vertical, and conglomeration:
Horizontal merger refers to two companies that were once competitors but came together to merge into one large organization. As one large operation, they are serving the same clientele under one entity.
Vertical merger is two companies who are a manufacturer and supplier, coming together as one. The main goal in a vertical merger is to increase efficiency in the supply chain to increase profits.
Conglomeration happens when two companies that are not in the same category merge into one operation. Usually this happens when companies want to diversify their business and reach out to other categories of assets and portfolios. Joint Venture are two companies joining forces, but as two business entities, such as a collaboration. "Each company will then take an interest, both operational and financial, in the new company and their share in the profits or losses of the new venture, which will be directly linked to the level of involvement or commitment they put forth from the start" (Scheid, 2010). Joint ventures have a positive or negative effect on the companies involved. It all depends on how the collaboration is perceived. Both companies must make careful consideration and decision making to eliminate any possible negative effect it may have on the company's business.
The difference in a joint venture, the original businesses that are participating do not dissolve. In a merger, the two participating companies are now under one entity, unlike a joint venture.
Personal Experiences One family member worked for Air Tran before South West bought them, now he works for SWA or SWA Tran as they call it. It has been difficult watching him go through it. The In-Law lost some of his tenures, was demoted, and took an extreme pay cut, because of not having the