Merger

Merger, the combining of two or more companies into a single corporation. In business, a merger is achieved when a company purchases the property of other firms, thus absorbing them into one corporate structure that retains its original identity. This differs from a consolidation, in which several concerns are dissolved in order to form a completely new company, or a takeover, which is a purchase of a company against its will. In a merger the purchaser may make an outright payment in cash or in company stock, or may decide on some other arrangement such as the exchange of bonds. The purchaser then acquires the assets and liabilities of the other firms. When two companies directly competing with each other merge, the process is called horizontal integration; when suppliers and customers merge, the process is vertical integration.

Mergers are often accomplished to revive failing businesses, to reduce competition, or to diversify production. In most countries, however, fairly stringent competition laws are enforced to be sure that mergers do not result in monopolies. In the United Kingdom, supervison is exercised by the Monopolies and Mergers Commission.