NAME: NWOKEDI OTITODILICHUKWU ERIC

REG NO: RNU/LAW2022/0058

COURSE NAME: INTRODUCTION TO BUSINESS

ADMINISTRATION

COURSE CODE: BUA 102

TOPIC: DISCUSS IN DETAIL THE EFFECT OF MERGER

ACQUISITION AND AMALGAMATION ON BUSINESS

ORGANIZATIONS
 DEFINITIONS

MERGERS: A merger is a contract that combines two existing companies into a

single new business. Companies can broaden their reach through mergers, enter

new markets, or increase their market share. A merger is the voluntary of two

businesses under essentially equal conditions into a single new legal entity.

ACQUISITION: A company makes an acquisition when it buys the majority or all of

the shares of another company in order to take over that business. The acquirer

can make choices on newly acquired assets without the consent of the target

company's other shareholders if they purchase more than 50% of the target

company's stock and other assets.

AMALGAMATION: A merger unites two or more businesses to form a new

organization. A merger and an amalgamation are not the same thing because

neither business exists as a separate legal entity. Instead, a brand-new

organization is created to hold the merged assets and obligations of the two

businesses.

Merger, acquisition, and amalgamation are significant corporate actions that

involve the combination of two or more business entities to form a single, larger

organization. These strategic moves can have various effects on the involved
companies and the overall business landscape. Let's discuss each of these terms

and their impacts on organizations in detail:

1. Merger:

A merger is a process where two or more companies come together to form a

new entity, often with the aim of achieving synergies, expanding market presence,

or pooling resources and expertise. Mergers can be classified into different types

based on the nature of the combination:

a. Horizontal Merger: Occurs when two companies operating in the same

industry and producing similar products or services merge together. The main goal

is to gain market share and reduce competition.

b. Vertical Merger: Involves companies from different stages of the supply

chain, such as a manufacturer merging with a supplier or distributor. This type of

merger can lead to better control over the supply chain and cost efficiencies.

c. Conglomerate Merger: Occurs when two companies operating in unrelated

industries merge. This type of merger allows diversification and risk reduction by

entering new markets.

i. Economies of Scale: Mergers can lead to cost savings due to economies of

scale. Larger organizations can reduce duplication of resources, share

infrastructure, and streamline operations, resulting in lower expenses.

ii. Increased Market Power: Merged companies often have a stronger market

presence and increased bargaining power. This can translate into better pricing

and negotiation terms with suppliers and customers.

iii. Enhanced Market Share: Merging with a competitor can help the combined

entity gain a larger market share, leading to a more dominant position within the

industry.

iv. Access to New Markets: Mergers can allow companies to enter new markets

and expand their geographical reach, enabling them to tap into new customer

segments and revenue streams.

v. Synergy: The integration of complementary resources, skills, and expertise

from both merging companies can create synergies, resulting in improved overall

performance and competitiveness.

An acquisition refers to one company (the acquirer) buying a significant stake or

complete ownership of another company (the target). Acquisitions can be friendly

or hostile, depending on the level of agreement between the involved parties.

Effects of Acquisitions on Business Organizations:

i. Access to Technology and Intellectual Property: Acquiring a company may

provide the acquirer with access to valuable technology, patents, and intellectual

property, which can boost innovation and competitiveness.

ii. Diversification: Acquisitions can help companies diversify their product or

service offerings, reducing reliance on a single market or industry.

iii. Talent and Human Resources: Acquiring a company can bring in skilled

employees and experienced management, augmenting the human capital of the

acquirer.
 iv. Elimination of Competition: Acquisitions of competitors can reduce

competition and enhance the acquirer's market position.

v. Brand and Customer Base Expansion: Acquiring established brands or

customer bases can enable the acquirer to expand its market reach and cross-sell

products or services to a wider audience.

3. Amalgamation:

Amalgamation is a process of combining two or more companies into a new

entity. It can be considered a form of merger, but it typically involves the

dissolution of the original entities, which then become part of the newly formed

company.

Effects of Amalgamations on Business Organizations:

i. Consolidation of Resources: Amalgamation allows for the consolidation of

resources, operations, and management, leading to more efficient use of assets

and improved financial performance.

the corporate structure by eliminating duplicate functions and streamlining

decision-making processes.

iii. Increased Financial Strength: Amalgamation can result in a combined entity

with stronger financial capabilities, including enhanced access to capital markets

and improved creditworthiness.

iv. Risk Diversification: By combining businesses, amalgamation can help spread

risks across different industries, markets, or product lines.

v. Enhanced Competitive Advantage: Amalgamation can create a more

competitive entity by leveraging the strengths and synergies of the combining

companies, leading to increased market power and profitability.

In Conclusion: It's important to note that the effects of mergers, acquisitions, and

amalgamations can vary depending on the specific circumstances, industry

dynamics, and the successful execution of integration strategies. Thorough due

diligence, effective integration planning, and clear communication with

stakeholders are critical to maximize the potential benefits and mitigate potential

risks associated with these corporate actions.