What is the difference between merger and joint venture

Vertical mergers- This is a merger between a company and customer or a company and a supplier. Conglomeration- A conglomeration occurs when two businesses with no common business areas join to become one. Under this category, there are both purchase and consolidation mergers. Product extension merger- This is a situation whereby two companies dealing with the same product in different markets merge.

Market extension merger- This is a merger between two companies selling the same product in different markets. What is a Joint Venture? There are several reasons that may necessitate the need for joint ventures; Where there is a need for more resources that are beyond what each individual firm has such as knowledge sharing and better technology.

A strategic business decision that may be beneficial to all the companies involved Similarities between mergers and joint ventures Both are formed to benefit from the advantages of combined operations.

Differences between mergers and joint ventures Description for mergers and joint ventures A merger occurs when two firms continue to carry out business operations as one single firm rather two separate firms.

Commitment required While mergers require a lot of commitment to efficiently operate, joint ventures require less commitment in comparison to mergers. Ownership of mergers vs. Scope Mergers have a larger scope. Personnel relationships In mergers, the personnel are forced to adapt to the conflicting methods of business management, as opposed to what they were used to before the merger.

Motives The purpose of a merger is to create opportunities for growth and also create benefiting avenues for enhancing the market share, while at the same time consolidating assets into one firm hence increasing revenues and decreasing costs.

Mergers vs. Joint ventures: Comparison Table Summary of Mergers vs. Joint Ventures As with the norm, businesses may experience challenges such as personnel, operating, financial, managerial, and profitability challenges.

Author Recent Posts. Tabitha Njogu. She has had the pleasure of working with various organizations and garnered expertise in business management, business administration, accounting, finance operations, and digital marketing. Latest posts by Tabitha Njogu see all. Help us improve. Rate this post! Next, make sure this option is also the most practical. Check that the strategy reflects the things your business does well.

You'll also need to assess whether you have resources and capacity to make the strategy work. Skip to main content. About Us About Us. Leave this field blank. Mergers Acquisitions Joint Ventures and Strategic alliances. Partnerships and Joint Ventures: Partnerships and joint ventures can offer both partners significant benefits, including sharing experience, skills, people, equipment and customer bases. Leave a comment Name :. Email :. Telephone Please note that this number will be used for administrative purposes and will not be shown if your comment is published.

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A product extension merger is when two different companies are selling or dealing with the same product but in different markets join.

A joint venture is a term that describes ownerships, risks, profits between two companies. It happens when a company wants to acquire a new market with the help of another company. It is for a short period of time. It has a certain or ultimate objective, and after that is achieved, a Joint Venture may be dissolved. When two people come together to form a temporary partnership for a specific project, then it can be called a joint venture, and partners are called co-venturers.

Joint ventures happen when companies want more resources such as knowledge or technology and which is far reach from an individual entity. It happens because to carry out a strategy that may be beneficial to all the companies involved in it. In Europe, Joint Ventures are a legal term and under company law. In different companies, different rules apply to joint ventures. Joint ventures involve a dark side like negative outcomes, unethical behaviors by companies and organizations with evil intentions.

In India, there are no separate laws regarding Joint ventures, and it is treated at par with domestic companies only. But public companies have limited restrictions. Both Mergers and Joint ventures are formed to gain benefits in the business. Apart from these, both mergers and joint ventures have their pros and cons. For instance, Mergers are very much expensive in nature, and it consumes a lot of time.

But the advantage is that through mergers, the stakeholders in the company can increase their net worth. There is a reduction of competition when mergers are done and also an increment in the market share.