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.