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What types of mergers are available to Michigan businesses?

Mergers and acquisitions occur regularly in the course of business in Michigan. These complex business transactions often serve as a way to help two businesses grow in what can sometimes be a cut-throat environment. However, some business owners may not be aware that there are various types of mergers available to businesses in Michigan.

One type of merger is a conglomerate merger. In a pure conglomerate merger, the two merging business do not share any of the same business activities. In a mixed conglomerate merger, the two businesses involved seek to expand their markets or products. However, businesses that complete a conglomerate merger will often still have the same competitors they had prior to the merger.

That being said, a conglomerate merger should not be confused with a product extension merger. In a product extension merger, the products each business entity produces have something in common, including being involved in similar markets. By joining together, the two businesses will potentially gain more consumers and therefore see more profits.

There are also market extension mergers. Businesses in this type of merger have similar products but do not sell them in the same marketplace. When companies enter into a market extension merger, they do so in order to increase the size of their market and through that, expand their base of clients.

There are also horizontal mergers and vertical mergers. A horizontal merger takes place when each business is a part of the same industry. The business entities, which may initially be competitors, consolidate into one company with the goal of creating a bigger business entity with a higher share in the marketplace. A vertical merger takes place when two business entities manufacture different goods that ultimately go to the production of the same product. The goal of such a merger may be to increase the efficiency of each entity.

Mergers can be highly complex business transactions. When two businesses decide to merge, it is important that each business make informed choices. It may be beneficial for business partners to seek legal advice, in order to better understand what options are available to them.

Source: Minority Business Development Agency, "5 Types of Company Mergers," accessed June 3, 2015

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