Types of Business Combinations
Business Combination Definition: When more than one organization irrespective of the nature of activities comes in a single platform in the shape of a new organization for the purpose of earning the profit.
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Difference between Business combination (Merger) and Acquisition
The acquisition is when one company (acquirer) obtains the hold of another company (acquire). In this type holding company usually, tag the branded item over acquire company product. The basic purpose is to get the growth with specific leading brand. Or it may be for getting an edge at low cost.
Difference between Business Combination and Joint Ventures
Difference between Business combination and the joint venture is in joint venture more than one company’s work together up to the completion of the targeted task and after that no more relation. All companies work remains the same as they were doing during and after joint venture. On the other hand in a business combination, a new organization with the new name comes into existence and existing organization goes to close.
The reason of Business combinations
- Increase the capital or for the stability of finance
- Cost cutting for more profit
- Controlling and leading the competition
- Growth of Business
- Getting multi-skilled technical staff
- Increasing managerial worth
- Avoiding excessive Production
- Capturing competitor resources
- Marketing and advertisement cost cutting
- Developing own monopoly in the market
Types of Business combination
Horizontal Combination: In this type of combination, organizations that are doing the same type of business merge together. An example is when more than one mobile company merged into a new one.
Vertical combination: under this combination chain of different organizations of one finished good merged together. For example, one organization is selling the juice to the market after purchasing raw material of Juice, liquid, Packing of Juice packets from different organizations. If the chain of these organization comes into a single entity it will be called vertical business combination.
Circular combination, when different types of an organization doing the different type of business activities merged together and form a new business organization it’s called Circular combination
Diagonal combination comes into place when industrial unit merged with industrial related services providing units.