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1 Meaning and definition of Business Combination

May arise when one entity acquires control over to combines with another business by acquiring the share capital of another or the tow entities exchange their issued share capitals. Generally, business combinations refer to transactions in which one company gains control, or at least controlling interest, in another company. A business combination can be aptly defined as amalgamation of the assets of two or more business entities for their consolidation as a single entity under single ownership. A business combination can be managed easily through the way of a voluntary acquisition, a merger, or a hostile takeover. In many cases, a preferred means of managing a business combination might be acquiring a controlling amount of stock. 1.2 Different types of Business Combinations Business combinations can be categorized into the following four types: Vertical combination This is a business combination wherein various departments of large industrial units come together under single management. Under this business combination all the stages, from purchase to selling of product, are linked by units. The key objectives of a vertical combination include: i. minimizing the per unit cost ii. elimination competition
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iii. hiring the experts services iv. supplying goods at lowest prices v. avoiding over production vi. improving production methods vii. achieving large scale benefits viii. finding proper market for their product ix. supervising the management x. reducing the middleman commission xi. earning maximum profit Horizontal combination Also referred as voluntary combination, it is an association of two or more business units of same nature under a single management. Both the business units involved in combination are engaged in same activity and their combination is, therefore, referred as horizontal combination. The key objectives of this business combination are the same as those of a vertical combination. Some examples of horizontal combination include: The Standard Oil Company's acquisition of 40 refineries. An automobile manufacturer's acquisition of a sport utility vehicle manufacturer. A media company's ownership of radio, television, newspapers, books, and magazines.

Advantages of Horizontal combination: The following are some benefits sought by firms that horizontally integrate: Economies of scale - acheived by selling more of the same product, for example, by geographic expansion. Economies of scope - achieved by sharing resources common to different products. Commonly referred to as "synergies." Increased market power (over suppliers and downstream channel members) Reduction in the cost of international trade by operating factories in foreign markets. Sometimes benefits can be gained through customer perceptions of linkages between products. For example, in some cases synergy can be achieved by using the same brand name to promote multiple products. However, such extensions can have drawbacks, as pointed out by Al Ries and Jack Trout in their marketing classic, Circular combination This business combination type involves different business units coalesce themselves under a single management. For instance, a shoes industry combining with cloth and sugar industry exemplifies mixed combination. The key objective of this benefit is securing the benefits of administrative ability by the way of common management.
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Diagonal combination A diagonal business combination involves two or more business entities performing subsidiary services combining themselves under a single management. The key objective of this amalgamation is making the business unit large and self sufficient.

1.3 Merger Merger simply means a combination of two or more to form a single new identity. In corporate world, Merger defined as a combo of two or more than two companies into a single company rather than remain separately owned and operated. Both companies' stocks are surrendered and new company stock is issued in its place. 1.4 Amalgamation In general, amalgamation is the process of combining or uniting multiple entities into one form. Amalgamate and its derivatives may refer to:

Metals and science

In mining, amalgamation was historically used in the patio process and pan amalgamation to recover precious metals from ore by combining them with mercury.

1.5 Difference between merger and amalgamation "Very often, the two expressions "merger" and "amalgamation" are taken as synonymous. But there is, in fact, a difference. Merger is restricted to a case where the assets and liabilities of the companies get vested in another company, the company which is merged losing its identity and its shareholders becoming shareholders of the other company. On the other hand, amalgamation is an arrangement, whereby the assets and liabilities of two or more companies become vested in another company (which may or may not be one of the original companies) and which would have as its shareholders substantially, all the companies." shareholders of the amalgamating

1.6 Difference between horizontal combination and vertical combination Horizontal integration is the process of merging similar industries, industries that produce similar products. Horizontal integration would include tactics like buying competing companies that produce the same goods as you do. Vertical
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integration is the process of buying out suppliers of that particular industry. For example, a steel company would have an advantage over competitors by vertical integration if that company bought out places like coal fields or iron mines, places that competing steel companies rely on to make their steel. This would let you control the raw materials and transportation systems. The main difference is that horizontal integration buys the competing companies while vertical integration aims at the raw material sources necessary to produce that product Nature: Under horizontal combination, units carrying on the same trade or activity join together. They operate at the same stage in the industry but in case of vertical combination, units operate at different stages of manufacture of a product.
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Elimination of Competition: The horizontal combination eliminates competition among the units so combined. But it is not so in vertical integration as the combined units were not competing with each other. Control over Market: Horizontal combination may lead to full control of a monopoly. But it is not so in case of vertical combination. Sell-sufficiency: Horizontal combination does not lead to self-sufficiency of materials. But in vertical integration, the
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manufacturer of a product may integrate with the supplier of raw material. This will lead to self-sufficiency.
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Inter-dependency: The combined units under horizontal combination are not interdependent as far as raw materials are concerned. All units operate as semi-autonomous units. The stoppage of work in one unit doesn't affect the working of others. But in case of vertical integration, there is a combination of successive stages of production. Stoppage of work at one stage will affect the functioning at all subsequent stages. For instance, bread can't be prepared if flour is not available. Flour can't be made available if.

1.7 Types of combination briefly INTERNAL LABOR T: Competing Interpretations 1) Labor economists emphasize technical determinants:

technological progress increases workers' skill monopoly in the firm and that internal advancement opportunities are required so that senior workers will train junior personnel 2) Williamson emphasizes informational constraints that favor internal labor promotion hierarchies over perfectly competitive labor market. 3) Neo-Marxists regarded internal labor markets as an effort by capitalists to control a volatile work force.
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Researchers have documented the impact of internal labor markets in two ways: 1) Attempts to infer how internal labor markets operate from data on individual career paths. E.g. attainment researchers have attributed racial and sexual differences in the effects that schooling and first job have on career outcomes to the exclusion of women and minorities from internal labor markets. This research does not illuminate how or why this occurs. 2) Other investigators have analyzed career processes in their organizational setting directly, detailing the criteria that employers use in structuring rewards and opportunities. Unfortunately, this research has often been limited to specific work contexts. THE IMPACT OF SIZE: -Wages are higher both in industries made up of large companies and in the larger companies within any given industry. -Granovetter argues that these relationships only characterize manufacturing industries. -Effects of schooling on income and status increase

monotonically with the size of employee's work location (for white, male, nonagricultural workers) (Stolzenberg 1978).
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Possible explanations: - Large bureaucracies may pay and promote more because scale economies increase worker productivity, structure of demand allows higher wages to be absorbed in product pricing. -Urban locations, where higher wages are necessary to offset competitors' offers. -Large organization are more vulnerable to worker unrest and rewards are higher to reduce the chances of labor-management conflict. IMPACT OF GROWTH: -Corporate growth increases promotion rates. (Even among those less likely to be promoted e.g. women). -Economic contraction disproportionately harms those the growth helps. IMPACT OF DEMOGRAPHY: -Individuals' careers are not independent (attainment research assumes they are).-Size of one's organizational cohort and its relation to other cohorts significantly affects career outcomes. E.g. members of small cohorts experience enhances mobility prospects. IMPACT OF TECHNOLOGY:

-Automation raises the average level of worker skill and increases the variance within firms, giving rise to skill-based career lines that reflect job idiosyncrasies.-Long-linked technologies (e.g. assembly lines) generate more lateral mobility because workers are interchangeable. -Mediating and Intensive technologies (e.g. client-oriented banks and research labs, respectively) foster more upward mobility. (In specialized professions knowledge is crucial). IMPACT OF UNIONIZATION: - ''Monopoly power'' perspective: unions push wages higher than productivity warrants, at the same time widening disparities between advantaged and disadvantaged groups. ''Collective violence'' perspective: regards union wage premiums as reasonable social reimbursements for the savings that unions generate in terms of proved governance and social control. Also viewed as equalizing agents. -Unions emphasize seniority-based rewards, and collective bargaining often arises in work settings where it is difficult to discern the relationships between worker characteristics and rewards.

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IMPACT OF ORGANIZATIONAL ENVIRONMENTS: -Good jobs are concentrated in ''core'' or monopolistic firms and industries. Explained by: technical mix; level of union and management interests in employment stability; ability to absorb higher labor costs due to market structure and demand schedules; growth, concentration, and change in organization forms; differences in the quantity and quality of managerial activity; and economic and political relationships with the state and foreign markets. ORGANIZATIONAL DIFFERENCES IN MATCHING WORKERS TO JOBS - HOW CAREER DYNAMICS DEPEND ON THE ORGANIZATIONAL SETTING Models of Employer Decision-Making -Human Capital: workers possess vocational aspirations, which are treated as exogenous, and invest in human capital so as to maximize their utility and earnings, subject to various constraints (e.g. innate ability). Firm's labor needs are determined by its technology (capital-labor ratio) and product demand. -marxian idea that ''control imperative'' shapes employment relations

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-Contemporary models reject the underlying assumptions that both the worker and the firm have perfect information and pursue a 1) maximizing Labor strategy in Competing technical Interpretations determinants: economists emphasize

technological progress increases workers' skill monopoly in the firm and that internal advancement opportunities are required so that senior workers will train junior personnel 2) Williamson emphasizes informational constraints that favor internal labor promotion hierarchies over perfectly competitive labor market 3) Neo-Marxists regarded internal labor markets as an effort by capitalists to control a volatile work force. Researchers have documented the impact of internal labor markets in two ways: 1) Attempts to infer how internal labor markets operate from data on individual career paths. E.g. attainment researchers have attributed racial and sexual differences in the effects that schooling and first job have on career outcomes to the exclusion of women and minorities from internal labor markets. This research does not illuminate how or why this occurs.

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2) Other investigators have analyzed career processes in their organizational setting directly, detailing the criteria that employers use in structuring rewards and opportunities. Unfortunately, this research has often been limited to specific work contexts. -Wages are higher both in industries made up of large companies and in the larger companies within any given industry. -Granovetter argues that these relationships only characterize manufacturing -Effects of schooling on income and status industries. increase

monotonically with the size of employee's work location (for white, male, nonagricultural workers) (Stolzenberg 1978). Possible explanations: - Large bureaucracies may pay and promote more because scale economies increase worker productivity, structure of demand allows higher wages to be absorbed in product pricing. -Urban locations, where higher wages are necessary to offset competitors' offers . -Large organization are more vulnerable to worker unrest and rewards are higher to reduce the chances of labor-management conflict.

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-Corporate growth increases promotion rates. (Even among those less likely to be promoted e.g. women). -Economic contraction disproportionately harms those the growth helps -Individuals' careers are not independent (attainment research assumes they are).-Size of one's organizational cohort and its relation to other cohorts significantly affects career outcomes. E.g. members of small cohorts experience enhances mobility prospects. -Automation raises the average level of worker skill and increases the variance within firms, giving rise to skill-based career lines that reflect job idiosyncrasies.-Long-linked technologies (e.g. assembly lines) generate more lateral mobility because workers are interchangeable. -Mediating and Intensive technologies (e.g. client-oriented banks and research labs, respectively) foster more upward mobility. (In specialized professions knowledge is crucial). ''Monopoly power'' perspective: unions push wages higher than productivity warrants, at the same time widening disparities between advantaged and disadvantaged groups. ''Collective violence'' perspective: regards union wage premiums as reasonable social reimbursements for the savings that unions
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generate in terms of proved governance and social control. Also viewed as equalizing agents. Unions emphasize seniority-based rewards, and collective bargaining often arises in work settings where it is difficult to discern the relationships between worker characteristics and rewards. Good jobs are concentrated in ''core'' or monopolistic firms and industries. Explained by: technical mix; level of union and management interests in employment stability; ability to absorb higher labor costs due to market structure and demand schedules; growth, concentration, and change in organization forms; differences in the quantity and quality of managerial activity; and economic and political relationships with the state and foreign markets. Models of Employer Decision-Making Human Capital: workers possess vocational aspirations, which are treated as exogenous, and invest in human capital so as to maximize their utility and earnings, subject to various constraints (e.g. innate ability). Firm's labor needs are determined by its technology (capital-labor ratio) and product demand. Marxian idea that ''control imperative'' shapes employment relations Contemporary models reject the underlying assumptions that both the worker and the firm have perfect information and pursue a maximizing strategy their personnel decisions.
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Organizations face greatest uncertainty in evaluating employee potential early n their careers. How do employers cope with this dilemma? -Education is one credential representing employee potential under imperfect information. Marxists argue that employers are motivated by a need to control the work force and use schooling to determine whether workers' values and traits are appropriate for the organizational control system in place. Kanter's idea of ''homosocial reproduction'' - similarities worth sex, race, social background and family status indicate whether someone can be trusted and whether communication with him/her will be easy wheat grains are not available their personnel decisions. Organizations face greatest uncertainty in evaluating employee potential early n their careers. How do employers cope with this dilemma? Education is one credential representing employee potential under imperfect-information. Marxists argue that employers are motivated by a need to control the work force and use schooling to determine whether workers' values and traits are appropriate for the organizational control system in place. Kanter's idea of ''homosocial reproduction'' - similarities wrt sex, race, social background and family status indicate whether someone can be trusted and whether communication with him/her will be easy.

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REFERANCE: Subject : Business Combination.

1.ttp://wiki.answer.com/Q/Definition_of_business_combination# 2.http://wiki.answers.com/Q/What_is_the_difference_between_horizontal _integration_and_vertical_integration#ixzz1wyDrYf00
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3.http://wiki.answers.com/Q/What_is_the_difference_between_merger_a nd_amalgamation_in_India#ixzz1wjqrXRRW 4.http://wiki.answers.com/Q/What_is_the_difference_between_merger_a nd_amalgamation_in_India#ixzz1wjqrXRRW 5.http://wiki.answers.com/Q/Defination_of_merger#ixzz1wy7EnG2o

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