Explain the nature of mergers and acquisitions and the reasons why they may be used as a form of strategy development.

Mergers and acquisitions consist of either joining two or more firms, or having one firm acquire another firm.

The rationale behind a merger or acquisiton is always strategic: a merger or an acquisition is carried out with the goal of improving the economic position and performance of the firms involved.

Some business strategies that can be implemented by a merger or acquisition are:

Horizontal integration: companies that sell similar products merge in order to join forces and expand their market reach. Vertical integration: companies in the same industry, but that sell different products (for example, one company sells cars and the other sells bikes) merge in order to expand their market share. Conglomerate formation: companies in different industries join in order to expand their markets even more.