What is a conglomerate merger?

Imagine a car maker joins forces with a soft drinks firm. A conglomerate merger is a type of merger between companies whose business activities are totally unrelated. A firm might agree to merge to increase market share or reduce its exposure to risk.

Where have you heard about conglomerate mergers?

Conglomerate mergers were commonplace in the 1960s, but are less prevalent nowadays. One of the more recent examples was the merger between the Walt Disney Company and ABC TV network in the US in the 1990s.

What you need to know about conglomerate mergers.

There are two types of conglomerate merger – pure and mixed. Pure conglomerate mergers involve firms whose products or services are completely unrelated, while mixed mergers involve businesses that are looking to expand their products or gain access to a wider market.

Potentially, companies that merge will be able to diversify and reach a larger target audience, but sometimes the new business doesn’t work out because firms end up spreading themselves too thinly.

A conglomerate merger is one of the things that affects the stock market, and can cause significant volatility in the share price of both firms involved.