A business is an organization that sells products or services for profit. It can range in size from a one-person operation to multinational corporations with operations worldwide. People who run businesses are known as entrepreneurs. Businesses can be structured as limited liability companies, partnerships, corporations or sole proprietorships.
A company may merge with another entity for many reasons. It can help it grow larger instantly, gain access to new markets or even gain a competitive advantage over dominant market players. It can also reduce operational costs or improve management and pricing models. Mergers are usually financed with cash or equity (stocks) and shareholders in the acquired company typically receive stock equal to their old shares in the new company.
Mergers can be vertical, allowing two companies to operate as separate links in the same supply chain, or horizontal, combining businesses at different stages of production. For example, a restaurant chain might buy a pizza company and a frozen yogurt business to provide more centralized marketing and sales departments. This is considered a horizontal merger.
A market extension merger combines two businesses that offer the same type of product in fresh geographic areas. This allows the combined company to expand its revenue base and customer base simultaneously. A good example is a U.S. regional bank merging with its Western counterpart to offer more banking locations in both regions of the country. A conglomerate merger occurs between two firms that operate in unrelated lines of business. Vivendi Universal, for instance, was formed in 2000 when it bought Seagrams and merged the companies into a large media and entertainment empire.