My exposure to MBA 'Jagons' has helped me to see that a lot of our entrepreneurs are challenged by a myopia view of business growth, leverages, and scale opportunities.
Lots of banks were struggling 2 billion Naira capital base before the mergers of 2005 to meet up with the 25 billion Naira capital base from CBN. Obviously the big strong swallowed the less privileged. This may not be interesting to the ones being swallowed but the entire industry gained deeper public trust and confidence.
Mergers and acquisition or M&A for short can be for horizontal integration where the merging firms do similar business and the benefit is the enjoyment of lower cost of business from scaling. It can also be vertical integration where both are looking for complementary effort, synergy, and exploration of a new line of business to increase market share.
For instance, a combination of the Pepsi beverage division with Coca-Cola would be horizontal in character. Creating a new, larger company with a larger market share is the aim of a horizontal merger. Due to the possible similarity of the merging companies' business processes, there can be potential to combine some operations—like manufacturing—and cut costs. MBDA.gov
An example of a vertical merger would be an automaker partnering with a parts supplier. An arrangement like this would provide the car sector more control over the manufacturing process and better prices on parts. In turn, a consistent flow of business would be ensured for the components section. MBDA.gov
Let's bring all that to our local context in Nigeria.
A portable water factory may go vertical to acquire an industrial borehole location as against drilling a fresh one to boost production. A cold room industry may partner with a water production facility as against building one or a water production factory acquisition of a cold room.
In the construction industry, there is a massive need for the integration of different models to build a robust base for synergy and competence.
Another vertical Integration example here; January 24, 2006, Burbank, CA; Emeryville, CA In keeping with its goal of producing exceptional creative content, The Walt Disney Company (NYSE: DIS) President and CEO Robert A. Iger announced today that Disney has decided to purchase Pixar (NASDAQ: PIXR), a leader in computer animation, in an all-stock deal that is anticipated to close by this summer. As per the deal, each Pixar share will be exchanged for 2.3 Disney shares. The deal is about $7.4 billion ($6.3 billion net of Pixar's slightly over $1 billion in cash) based on the company's fully diluted shares that are currently outstanding. https://thewaltdisneycompany.com/disney-to-acquire-pixar/
