Congeneric Merger
What Is a Congeneric Merger?
A congeneric merger is a type of merger where two companies are in something very similar or related industries or markets yet don't offer similar products. In a congeneric merger, the companies might share comparable distribution channels, giving synergies for the merger. The procuring company and the target company might have overlapping technology or production systems, making for simple integration of the two elements. The acquirer might consider the target to be an opportunity to grow their product line or gain new market share.
Grasping Congeneric Mergers
A congeneric merger can permit a target and its acquirer to exploit overlapping technology or production processes to extend their product line or increase their market share. A product extension merger is a sort of congeneric merger where the product line of one company is added to the product line of the other. This permits the merged company to benefit from access to a bigger customer base, which could then mean greater market share and profits.
Types of Mergers
Notwithstanding congeneric mergers, there are several other merger types, like conglomerate, horizontal, or vertical. While there are many justifications for why companies participate in mergers, common factors incorporate the possible growth of the business, product diversification, and cost-viability.
Conglomerate Merger
As opposed to a congeneric merger, where the target and the acquirer are in comparable industries, a conglomerate merger happens between companies that are not the slightest bit related. Frequently, the two companies included take part in totally various industries with very little overlap in the manner they operate their businesses. Conglomerates look to diversify their company by claiming numerous unrelated products or businesses. This diversification is part of an overall risk management strategy that might be useful to the company endure market slumps or changes.
Horizontal Merger
A horizontal merger includes two contending companies in a similar industry converging to form one bigger company. The expected gains in market share are the primary main impetus behind horizontal mergers. Companies that union can likewise experience cost savings through economies of scale.
Vertical Merger
A vertical merger happens when a target and an acquirer are engaged with the production of a decent or delivery of service at various phases of the production interaction. A company have some control over a greater amount of its supply chain by purchasing the companies that produce its bits of feedbacks through an upstream vertical merger.
A vertical merger offers a company better control over their production cycle, which thus can lead to decreased costs and greater productivity.
Real World Example of a Congeneric Merger
An illustration of a congeneric merger is while banking monster Citicorp merged with financial services company Travelers Group in 1998. In a deal valued at $70 billion, the two companies combined efforts to make Citigroup Inc. While the two companies were in the financial services industry, they had different product lines. Citicorp offered consumers traditional banking services and credit cards. Voyagers, then again, was known for its insurance and brokerage services. The congeneric merger between the two permitted Citigroup to become perhaps of the greatest financial service companies in the world.
Features
- The two companies engaged with a congeneric merger might share comparable production processes, distribution channels, marketing, or technology.
- The overlap between the two companies in a congeneric merger can make a synergy where the combined performance of the merged companies is greater than the individual companies themselves.
- A congeneric merger can assist the getting with companying to rapidly increase its market share or extend its product lines.
- A congeneric merger is where the obtaining company and the target company are in something similar or related industry however have different business lines or products.
