As seen from the above explanation also, it became clear that there are various of M & A depending upon the time and the place. Let us try to classify and organise the different types of M & A here.
1. Merger and Acquisition
M & A (merger and acquisition) has so far, been explained as a single concept. However, strictly speaking merger and acquisition need to be defined separately.
A merger stands for formation of combined entity on the basis of a merger agreement by the two or more than two companies. According to the Commercial Law Act, there are two types of mergers, namely, the merger by absorption (merger) or the merger by new establishment (consolidation).
In the case of merger (by absorption), one by the two companies which are merging disappears, whereas, the other survives and continues. On the other hand, in the case of consolidation (new establishment), all the merging companies cease to exist and a new company is formed.
In the case of acquisition, the acquiring enterprises or the individuals aim at acquiring either partially or the total management right or control right of the other company and procures the assets, different operation departments and shares etc. of the company, which is being acquired.
However, the M & A is very often used as single concept and it is not necessary to over-emphasise on the strict boundaries. Now let us try to see the classification of M & A from different angles.
2. Classification on the basis of functions
While laying focus on the type of changes an operation structure undergoes as a result of M & A, it is possible to classify the M & A broadly into three, as understood by the history of M & A in America. These categories are given below.
· Horizontal M & A
Horizontal M & A is the merger and acquisition of enterprise belonging to the same industry. This type of M & A is executed while aiming at expansion of operation, increase in the market share and to evade competition.
· Vertical M & A
Vertical M & A is the merger and acquisition of enterprises which deal with different manufacturing stages of the same product. This type of merger and acquisition is executed in order to avoid application of Monopoly Prevention Act as seen in the case of second wave in the history of America or in order to establish the consistent manufacturing process and to stabilise the management.
· M & A for diversification
The M & A for diversification basically aims at diversification and it involves acquisition and merger of these enterprises, which posses such products that have no competitive relationship with the operations of one’s company. It is called Conglomerate type M & A when there is absolutely no relationship with the operations of one’s own company.
3. Rival M & A and friendly M & A
This is a classification based on the degree of mutual satisfaction or dissatisfaction among the partners. It is called friendly M & A when the partners, who have undergone merger and acquisition are mutually satisfied. The typical examples of friendly M & A are the relief acquisition etc. In contrast, it is called rival M & A when the enterprise, which is merged or acquired is not defensive steps as far as possible.
In Japan, as explained earlier also, there is almost no case of rival M & A.
4. Classification on the basis of mode of payment
There can be classification on the basis of mode of payment for the merger or acquisition. One is the payment in cash and the other is through transfer of stocks.
1. Merger and Acquisition
M & A (merger and acquisition) has so far, been explained as a single concept. However, strictly speaking merger and acquisition need to be defined separately.
A merger stands for formation of combined entity on the basis of a merger agreement by the two or more than two companies. According to the Commercial Law Act, there are two types of mergers, namely, the merger by absorption (merger) or the merger by new establishment (consolidation).
In the case of merger (by absorption), one by the two companies which are merging disappears, whereas, the other survives and continues. On the other hand, in the case of consolidation (new establishment), all the merging companies cease to exist and a new company is formed.
In the case of acquisition, the acquiring enterprises or the individuals aim at acquiring either partially or the total management right or control right of the other company and procures the assets, different operation departments and shares etc. of the company, which is being acquired.
However, the M & A is very often used as single concept and it is not necessary to over-emphasise on the strict boundaries. Now let us try to see the classification of M & A from different angles.
2. Classification on the basis of functions
While laying focus on the type of changes an operation structure undergoes as a result of M & A, it is possible to classify the M & A broadly into three, as understood by the history of M & A in America. These categories are given below.
· Horizontal M & A
Horizontal M & A is the merger and acquisition of enterprise belonging to the same industry. This type of M & A is executed while aiming at expansion of operation, increase in the market share and to evade competition.
· Vertical M & A
Vertical M & A is the merger and acquisition of enterprises which deal with different manufacturing stages of the same product. This type of merger and acquisition is executed in order to avoid application of Monopoly Prevention Act as seen in the case of second wave in the history of America or in order to establish the consistent manufacturing process and to stabilise the management.
· M & A for diversification
The M & A for diversification basically aims at diversification and it involves acquisition and merger of these enterprises, which posses such products that have no competitive relationship with the operations of one’s company. It is called Conglomerate type M & A when there is absolutely no relationship with the operations of one’s own company.
3. Rival M & A and friendly M & A
This is a classification based on the degree of mutual satisfaction or dissatisfaction among the partners. It is called friendly M & A when the partners, who have undergone merger and acquisition are mutually satisfied. The typical examples of friendly M & A are the relief acquisition etc. In contrast, it is called rival M & A when the enterprise, which is merged or acquired is not defensive steps as far as possible.
In Japan, as explained earlier also, there is almost no case of rival M & A.
4. Classification on the basis of mode of payment
There can be classification on the basis of mode of payment for the merger or acquisition. One is the payment in cash and the other is through transfer of stocks.