Types of mergers in India

1. Horizontal Mergers:

Horizontal mergers, also known as horizontal integration, occur between entities involved in competing businesses at the same stage of the industrial process. This type of merger aims to eliminate a competitor, consolidating a stronger market presence. The benefits include economies of scale and scope. The Competition Commission of India ("CCI") closely scrutinizes these mergers.

2. Vertical Mergers: Vertical mergers involve the combination of two entities at different stages of the industrial or production process. For instance, a merger between a construction company and a company producing bricks or steel would achieve vertical integration. Companies benefit from lower transaction costs, synchronized demand and supply, and increased independence and self-sufficiency.

3. Congeneric Mergers: Congeneric mergers occur when two companies are in the same or related industries but offer different products. These mergers may share distribution channels, providing synergies. Companies in congeneric mergers often have overlapping technology or production systems, facilitating a smooth integration. This type of merger is common for entities seeking to expand their market shares or product lines.

4. Conglomerate Mergers: Conglomerate mergers involve entities in unrelated industries. These mergers aim to utilize financial resources, increase debt capacity, and enhance the value of outstanding shares through increased leverage and earnings per share. The merger with an unrelated business allows companies to diversify without incurring significant start-up costs.

5. Cash Mergers: In a cash merger, also known as a cash-out merger, shareholders of one entity receive cash instead of shares in the merged entity. This provides an exit strategy for the cashed-out shareholders.

6. Triangular Mergers: Triangular mergers are often chosen for regulatory and tax reasons. In this three-part arrangement, the target merges with a subsidiary of the acquirer. Depending on which entity survives the merger, it can be forward (the target merges into the subsidiary) or reverse (the subsidiary merges into the target).