Conglomerate merger


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Conglomerate merger

A merger involving two or more firms that are in unrelated businesses.

Conglomerate Merger

A merger in which the merging firms are in completely different industries. Two companies may complete a conglomerate merger for any number of reasons. Among the most prominent are the desire to expand into new markets and thereby reduce unsystematic risk and a need to eliminate redundant activities by consolidating certain departments (a process known as synergy). Pure conglomerate mergers occur when the parties have absolutely nothing in common, while mixed conglomerate mergers come from the desire of the parties to extend their markets or products. A potential drawback to a conglomerate merger is the fact that a firm may become too big and difficult to operate, resulting in inefficiency.
References in periodicals archive ?
Thus, the law-study shows that a conglomerate merger can increase the ability of the merged firm to induce a rival conglomerate that operates in at least one market of both merger partners not to undercut its contrived oligopolistic prices by enabling it to engage in cross-market retaliation and/or to reciprocate to such a conglomerate rival's abstention from undercutting not only in the same market but cross-markets (67) (as well as by creating a merged firm that inherits the reputation for engaging in strategic conduct of the merger partner that has the stronger such reputation).
Matsusaka (1993) takes a deep look at the astonishingly high pre-merger profit rates of target companies during the conglomerate merger wave.
Finally, if a transaction is neither horizontal nor vertical, it is classified as a conglomerate merger.
A pure financial rationale for the conglomerate merger.
She reiterates that, for companies which undertake a vertical merger, it is a question of acquiring a supplier (for example, a steel manufacturer acquiring a supplier of iron ore), while a conglomerate merger concerns companies whose activities are complementary (for example, a company producing razors buying a company producing shaving foam).
Catalyst in the Transnational Conglomerate Merger Debate, 37 NEW ENG.
Ever since the conglomerate merger wave of the 1960s, economists have tried to understand the efficiency properties of conglomerates.
During the heyday of the conglomerate merger wave of the 1960s, for example, venerable "experts" advised Congressional committees, as well as Fortune 500 corporations, that conglomerates were the wave of the future.
The estimated coefficient for the different types of mergers support the hypothesis that workers are least likely to belong to a union if employed in industries with greater levels of conglomerate merger activity.
Under the Reagan administration's Baxter guidelines, conglomerate merger activity quickened again in the flush 1980s.
In section IV we use the model as a framework to analyze two hypothetical situations, the first being entry into a supply agreement containing a most-favored-customer clause, and the second being a conglomerate merger that may enable bundling.
Palia, 1999, "A Reexamination of the Conglomerate Merger Wave in the 1960s: An Internal Capital Markets View," Journal of Finance 54, 1131-1152.