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Merger & Acquisition: Types, Stages, and Importance


— September 9, 2022

Merger and acquisition are defined as the consolidation of companies or assets to stimulate market share and gain a competitive business advantage.


According to Statista, the global M&A deals amounted to 2.8 trillion US dollars. In India itself, the 2020 M&A deal flow crossed the $82 billion mark, which was about 22.9% more than that in 2019. Such tremendous growth has time and again established the increasing need for merger and acquisition companies in India by foreign investors planning to grow their business in the country.

Merger and Acquisition a detailed insight

Merger and acquisition are defined as the consolidation of companies or assets to stimulate market share and gain a competitive business advantage.

While “Merger” and “Acquisition” are often used interchangeably, both are widely different in definition.

Merger: When two companies combine to form a new establishment, it is a merger.

Acquisition: An acquisition takes place when a company completely purchases another existing company. 

What are the types of M&A?

  • Horizontal

A horizontal M&A takes place between two companies with the same products and services.

  • Vertical

When two companies with different products and services merge, it is a vertical M&A.

  • Concentric

The merger between two companies that share the same customer base but trade on different products and services is known as Concentric M&A.

  • Conglomerate

A conglomerate is an act of merging two completely unrelated companies, both in terms of service and customer base.

4 Stages of M&A

Open room full of workstations; image by Startup Stock Photos, via Pexels.com.
Open room full of workstations; image by Startup Stock Photos, via Pexels.com.
  • Identifying and shortlisting targets
  • Structuring deal strategy and valuations
  • Drafting of the final legal agreements
  • Post-acquisition integration, planning on all fronts like finance, organization etc.

Importance of M&A

  • M&A helps to diversify the product and service base
  • Helps to attain large market share
  • Improve the customer base
  • New technologies and shared distribution channels help to attain financial gains.

India is a growing hot spot for foreign investment. However, its cultural diversity and complicated financial structure often pose a huge risk in the execution of M&A for foreign investors. Therefore, it is crucial to avail of assistance from the best M&A consulting firms in India like Tecnova to secure sustainable growth.

Reference links:

https://www.iflr.com/article/b1qxjh4rxcxnxx/mampa-report-2021-india 

https://www.investopedia.com/ask/answers/why-do-companies-merge-or-acquire-other- 

https://www.statista.com/statistics/619915/value-of-inbound-and-outbound-manda-india-by-industry/#:~:text=In%202019%2C%20the%20value%20of,outbound%20M%26A%20activity%20that%20year.companies/ 

https://www.statista.com/statistics/267369/volume-of-mergers-and-acquisitions-worldwide/#:~:text=In%202020%2C%20the%20value%20of,dollars%20in%20the%20previous%20year

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