Conglomerate merger definition
/What is a Conglomerate Merger?
A conglomerate merger is the combination of two or more entities that operate in completely different markets. Alternatively, they may operate in completely different geographic regions.
Advantages of a Conglomerate Merger
Those favoring the use of these mergers claim that they reduce the level of risk for the resulting firm, since the businesses are not impacted by the same economic factors. This means that an entity created in this manner has a better chance of riding out drops in economic activity that only impact a few industries.
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Disadvantages of a Conglomerate Merger
The downside of conglomerate mergers is that there are no benefits from the usual reasons for a merger, such as an expanded product line, overlapping cost reductions, and cross-selling to customers. Further, conglomerate mergers require an unusually large bureaucracy to maintain control over the many unrelated businesses. When there is a large bureaucracy, the decision-making process is slowed down, which can impede the competitiveness of subsidiaries.