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CH-4: TOPIC – ENTERPRISE GROWTH STRATEGIES

CODE : 241604010113

NOTES :

1. MERGERS : A merger is an agreement that unites two existing companies into one new company.
The acquiring company takes over the assets and liabilities of the merged company.All the
combining companies are dissolved and only the new entity continues to operate.
2. AMALGAMATION : Two entities combine together and form a new entity. Extinguishing both the
existing entities.
3. ABSORPTION : It is the process under which an existing large company purchases
the business of another small company or companies doing similar business. In other words,
when an existing company takes over the business of one or more existing companies carrying
similar business, it is called absorption.
4. TYPES OF MERGERS :

CONGLOMERATE HORIZONTAL VERTICAL

MARKET PRODUCT
EXTENSION EXTENSION

5. ACQUISITION : Business acquisition is the process of acquiring a company to build on
strengths or weaknesses of the acquiring company. A merger is similar to an acquisition but
refers more strictly to combining all of the interests of both companies into a stronger single
company.

The process begins with defining the type of business that would make a good acquisition.
Generally businesses within the same segment or a highly complementary market segment are
targeted. Once defined the target business is approached and if interest is shown due
diligence is performed to ascertain the financial and other conditions of the business.

When the financial terms are agreed upon, and the contract is signed the merger portion of the
acquisition begins. Overlapping processes, personnel and products are evaluated and the better-
performing pieces are retained.
6. TYPES OF ACQUISITION :

A. FRIENDLY – acquisition under friendly terms.
B. REVERSE – private company takes over a public company.

C. BACKFLIP – purchasing company becomes the subsidiary company. It is very rare.
D. HOSTILE – forcible acquisition.