merger in corporate business, fusion of two or more corporations by the transfer of all property to a single corporation. The remaining corporation continues in existence, having absorbed the other(s). Mergers may be of various types: A vertical merger integrates different types of businesses that may share a supplier-customer relationship; a horizontal merger brings together related businesses; an extensional merger. joins two similar businesses to enter a new market; and a hostile takeover occurs when a stronger business absorbs another against its will. The methods of effecting mergers vary. Often the corporation that continues to function makes an outright purchase of the property and stock of the others; exchange of bonds, options, and other agreements are also employed by the corporations involved.

Mergers may be effected to increase profits and reduce losses through the reduction of competition, to diversify production, to protect against the liabilities of concentration in a single area, or to revive or rejuvenate failing businesses by the infusion of new management and personnel. Mergers for monopolistic purposes were among the unfair practices that the Sherman Antitrust Act (1890) and, more especially, the Clayton Antitrust Act (1914) attempted to correct. The international nature of many modern corporations now also subjects mergers to antitrust scrutiny overseas, particularly in the European Union.

The end of the 20th cent. witnessed a great increase in mergers; in the United States alone, 60,375 mergers involving a total of over $4.5 trillion occurred between 1980 and 1996. Among the largest recent U.S. mergers are those between America Online and Time Warner (2000; $165 billion, but worth significantly less after the bubble in Internet-related stocks collapsed), Exxon and Mobil (1999; $81 billion); Citicorp and Travelers Corp. (1998; $72.6 billion), AT&T and Bell South (2006; $67 billion), SBC Communications and Ameritech (1998; $60.1 billion), and AT&T and TCI (1999; $48 billion).

See also conglomerate .

MERGER

The combination or fusion of one thing or right into another thing or right of greater or larger importance so that the lesser thing or right loses its individuality and becomes identified with the greater whole.

In contract law, agreements are merged when one contract is absorbed into another. The merger of contracts is generally based on the language of the agreement and the intent of the parties. The merger of contracts is not the same as a merger clause, which is a provision in a contract stating that the written terms cannot be varied by prior or oral agreements.

Estates affecting ownership of land are merged where a greater estate and a lesser estate coincide and are held by the same individual. For example, merger occurs when a person who leases land from another subsequently is given ownership of it upon the death of the lessor who has so provided in his will.

In criminal law, the commission of a major crime that includes a lesser offense results in the latter being merged in the former. For example, the crime of rape includes the lesser offense of sexual abuse which is merged into one prosecution for rape.

cross-references

Lesser Included Offense; Mergers and Acquisitions.

MERGER

A merger is the joining together of two or more companies. The usual goal of a merger is to increase market share, diversify into new products or markets, gain improved efficiency, or eliminate a competitor. Mergers usually take one of three forms: one business may merge with another through purchasing its assets; the merging companies may form a completely new company that acquires the assets of both firms (a "consolidation"); or the two companies may exchange stock with each other (known as "a pooling of interests"). When the acquired company resists the merger, it is referred to as a "hostile takeover." Mergers that occur between two companies in the same industry are known as "horizontal mergers," and when one company acquires a customer or supplier it is known as a "vertical merger." When the merging companies are in two different industries, the resulting company is known as a "conglomerate."

In U.S. history, mergers have generally occurred in spurts and usually when the stock market is enjoying strong "bullish" growth. The first major merger period occurred between 1895 and 1904, when the expansion of the U.S. railroad network made it possible for firms to combine and serve a truly national market for the first time. Between 1892 and 1902 more than 2600 U.S. firms were swallowed up by mergers, and in roughly the same period the 100 largest U.S. companies used mergers to increase in size by a factor of four. In 1901 the American Can Company was formed through the merger of no less than 120 companies. The next big merger period occurred in the late 1920s, when the emergence of radio and the truck presented new opportunities to create national markets through radio advertising and local distribution.

The merger boom of the 1960s peaked in 1968, when the 200 largest U.S. corporations acquired 1.6 percent of the entire manufacturing assets in the U.S. economy. Because of the federal government's successful attempts to prevent companies from forming monopolies many of the mergers of the 1960s took the form of conglomerates. A fourth period of intense merger activity began in the early 1980s and continued into the 1990s. The driving force behind these mergers were technological advances, global competition, and the deregulation of industries, such as the airline industry, that had once been closely supervised by the federal government.

merg·er / ˈmərjər/ • n. a combination of two things, esp. companies, into one: a merger between two supermarket chains | local companies ripe for merger or acquisition.

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