how mergers are structured
mergers can be structured in different ways based on the relationship between the two companies involved in the deal mergers may also be distinguished by following two financing methods each with its own ramifications for investors as the name suggests this kind of merger occurs when one company purchases another company the purchase is made with cash or through the issue of some kind of debt instrument the sale is taxable which attracts the acquiring companies who enjoy the tax benefits acquired assets can be written up to the actual purchase price and the difference between the book value and the purchase price of the assets can depreciate annually reducing taxes payable by the acquiring company with this merger a brand new company is formed and both companies are bought and combined under the new entity the tax terms are the same as those of a purchase merger vertical vs horizontal acquisitionshorizontal integration and vertical integration are competitive strategies that companies use to consolidate their position among competitors horizontal integration is the acquisition of a related business a company that opts for horizontal integration will take over another company that operates at the same level of the value chain in an industry for instance when marriott international inc acquired starwood hotels resorts worldwide inc 12vertical integration refers to the process of acquiring business operations within the same production vertical a company that opts for vertical integration takes complete control over one or more stages in the production or distribution of a product apple for example acquired authentec which makes the touch id fingerprint sensor technology that goes into its iphones 13