Corporate connection

Company connection (or company merger ) refers to the contractually agreed close cooperation between different companies ( cooperation ) or the economic and legal merging of different companies into a larger economic unit ( concentration , see company concentration ). It is not essential that the independence of the individual companies in the area of economic decisions is abolished. Company connections are carried out for different reasons, but ultimately the intention is to gain more market power, for example through larger market shares .

to form

cooperation

Cooperation refers to the voluntary collaboration between different companies for the joint implementation of large projects or for the implementation of common interests against third parties, for example in the form of a strategic alliance. The characteristics of the cooperation are, on the one hand, the cooperation between companies by coordinating functions or outsourcing functions and transferring decision-making to a joint institution (for example in the form of an open trading company - OHG). On the other hand, the affiliated companies must maintain their legal independence and also their economic independence in the areas that are not subject to the cooperation agreement.

If the cooperation is associated with restraints of competition, such as price fixing, the division of markets, non- compete obligations, delivery or purchase obligations, etc., the cooperation must be measured against national or European competition law, in particular the prohibition of cartels .

concentration

The concentration ( corporate concentration ; more precisely: company concentration), however, describes the merger of companies under task of their economic independence. The legal independence remains, however. The main feature of company concentrations is the subordination of the merged companies to a single management. The merger does not necessarily have to be voluntary. This is done either through the acquisition of a majority stake by the controlling company or through the conclusion of a domination agreement . If the companies give up their legal independence during the merger, one speaks of a merger . A fusion is present whenever either a company by recording will be integrated into an existing business or new formation , where two undertakings A and B , a new company C form (see also fusion ).

From a legal point of view, the concentration of companies basically represents a concentration which, if it reaches or exceeds a certain level, is subject to national or European concentration control .

The economic development towards globalized markets and the increasing mechanization and automation of production and sales processes, as well as the safeguarding of raw material and energy resources as well as increasingly expensive research and development projects lead to increased concentration tendencies in larger companies. This forces small and medium-sized companies to cooperate in order to survive in the market . This shows the tendency of the free market economy towards gradual self-destruction through the abolition of free competition due to cooperation and efforts to concentrate on the part of companies.

A connection between dependent companies is not a merger. Therefore, the combination of two companies, the majority of which are held by the same parent company, is an intragroup connection that is irrelevant from the point of view of the concentration.

Objectives

General goals

The main objective of a business combination is to maximize profit over the long term. The individual steps towards this goal are:

Growth: Internal or natural growth can only be expected quickly in new, prosperous markets with little competition. External growth is possible through a corporate relationship. Often one company is taken over by another (see for example Daimler-Benz AG and Chrysler Corporation or, as an example of a hostile takeover , Vodafone and Mannesmann ).
Increase in profitability: The synergy effect is often cited for this. By dismantling or merging duplicate departments after the merger - such as the financial accounting or the human resources department - rationalization effects are achieved. The exchange of existing know-how in the company should also increase profitability.
Reducing the risk: By dividing the risk among several partners in the cooperation or by diversifying into new products and markets when concentrating, the risk for the merged individual companies should be reduced.

Goals for individual company areas

procurement

A joint appearance on the procurement market can improve the negotiating position vis-à-vis strong suppliers. More favorable conditions (delivery conditions, payment conditions) and - through correspondingly larger purchase quantities - more favorable procurement prices can be enforced. Trading companies in particular have come together to form purchasing cooperatives. In the case of industrial companies, risk reduction in the supply of raw materials, both quantitatively and qualitatively, is in the foreground. Here connections with companies of the upstream production stage (raw material extraction companies) are entered into.

production

The aim is to improve the production processes in terms of quantity, quality, location and time. Further savings potential can be achieved in process engineering through classification and standardization .

financing

The high financial burdens, especially with large projects, can usually not be borne by a single company alone. Therefore, companies enter into cooperation with one another in order to be able to carry out such projects. The merger to form a working group or a project holding company is intended to expand the financing options and distribute the risk among several partners.

The merger can be financed through existing own funds, external financing (bank loans), equity financing, own shares or a share capital increase.

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The main motive for mergers in this area is to improve sales opportunities through a joint sales organization. By coordinating the sales markets and marketing measures, the distribution of products is made more efficient. Another consequence of the merger is the expansion of the sales program (creation of cross-selling potential). This has a risk-reducing effect, as it secures sales opportunities. Risk is spread through diversification. Possibly. The new size also enables the development of foreign markets.

Forms of corporate connections

consortium

Consortia are company connections on a contractual basis for the processing of precisely defined tasks. After completing these tasks, they dissolve again. The form of the civil law partnership (GbR) is normally chosen as the type of company . The most frequently encountered are banking consortia for the purpose of issuance of securities such as bonds or shares or to award larger loans are made. In industry, consortia are mainly formed to carry out large projects. Like any other cooperation, the consortium can also fall under the ban on cartels if it is associated with restraints of competition.

cartel

Cartels are cooperation agreements between companies on the basis of contracts between companies, concerted practices or resolutions by company associations that are regularly entered into with the aim of restricting competition in the relationship between the partners involved in it or in relation to third parties. The legal and organizational independence is retained externally. If the cooperation is associated with restrictions of competition, it is subject to cartel law , possibly also to the ban on cartels .

syndicate

The syndicate is the strictest form of cartel . The companies involved are partially giving up their economic and legal independence. Core functions such as sales or procurement are transferred to an independent trading company. Syndicates are generally prohibited in Germany.

joint venture

Joint venture ( joint venture , German "joint venture") are of two or more companies jointly supported corporative structures which are connected in any way with the management of the parent company. In this form of company connection, individual company activities are not only linked in an organizational way, but the necessary resources are also brought into the jointly founded company. Joint ventures are often set up to develop new, v. a. to gain a foothold in foreign markets or to set up production facilities there. Often a company similar to the German GmbH is founded together with a local company. In the new company, investments in the form of intangible assets, such as B. Licenses, rights, customer base, etc. or in the form of real estate, production facilities or financial resources. Often the shares of the two (or more) shareholders are equal, i. H. equal parts.

Strategic alliance

A strategic alliance is a formal relationship between two or more companies, often in the form of an association , in order to achieve one or more jointly defined goals. The companies remain legally and economically independent as part of a strategic alliance.

Companies support the strategic alliance with various resources such as capital , production factors , products , knowledge or expertise . The expectation is that the cooperation advantages of the strategic alliance ( network effects ) are greater than the individual efforts of a single company.

Trust

A trust (full English name: trust company) is a contractually agreed association of several companies. Objectives can be to eliminate competition, to create a market or a production monopoly, or to set prices.

Most of the companies give up legal and economic independence, which then lies with the managing trustees of the holding company, but not participation in the profits of the holding company. Trusts pursue goals similar to corporations, but can pursue them more efficiently, since the subordinate companies have become completely dependent ("went under").

A trust can arise in two ways. On the one hand by taking up a company (A buys B) or by creating a new one (A and B found C, A and B no longer exist). So trusts are the result of mergers.

Community of interests

Business combination to achieve a common economic purpose. These associations usually have the legal form of a BGB-Gesellschaft (GbR) or a registered association (eV). It is often the preliminary stage of a merger. The companies remain legally independent unless this is contractually reduced.

Group

According to Section 18 of the Stock Corporation Act (AktG), a controlling company and one or more dependent companies form a group. The individual companies are then considered to be group companies . The legal independence of the dependent companies continues to exist, but they lose their economic independence. In Germany around 90% of the stock corporations and around 50% of the partnerships are organized in corporations or group-like structures.

There are two basic types of corporate group. The equality group exists in the case of equality of the companies without superordinate or subordinate relationship . One then speaks of sister companies . In the case of a subordinate group , on the other hand, one speaks of a parent company and a subsidiary .

Classification

Business combinations can be classified as follows:

Business combinations on a contractual basis : (regularly non-equity strategic)

Interest group, working group , cooperative , cartel , consortium , syndicate

Business combinations with equity participation : (equity strategic)

Group , trust (economy) , joint venture

Alternatively, business combinations are also classified based on the production stages of the companies involved:

Horizontal mergers take place between companies at the same level of production, for example several coal mines or a merger of automobile manufacturers. Advantage / reason: cost savings, unit cost degression, use of synergies .
Vertical mergers take place between different (upstream and downstream) production stages, for example a coal mine merges with a steelworks that procures the coal (supplier principle, advantage / reason: cost savings in procurement, sales security)
Diagonal or inorganic or lateral mergers take place between companies of different production levels and industries, creating a conglomerate (e.g. Oetker group: food, banks, shipping companies, hotels, food trade; advantage / reason: risk diversification)

Risk of dominance

Through company mergers, the parties involved usually strive for market dominance, although the risk of oligopoly and monopoly formation increases (relative concentration or centralization of capital).

A dominant position is presumed under German law if a company has a market share of more than a third. In this case, the Cartel Office can prevent a merger if the respective companies cannot demonstrate that their merger has improved competition.

In Marxism it is assumed that over time more and more companies worldwide merge or are taken over ( hostile takeover ). Ultimately, these takeovers would result in a single global " global corporation " that would inevitably have a dominant position. This situation could not be prevented by cartel authorities in the long term, because it is logically a result of competition. The development of the various companies into a single global corporation would ultimately lead to the market economy transforming itself into a planned economy .

Merger facts

→ Main article: Merger control

In both European and national law, the "amalgamation" is usually defined and substantiated by elements of amalgamation:

In Germany, the merger is subject to Sections 35 ff. Of the Act against Restraints of Competition (GWB), which contain the relevant merger facts. After that there is a merger

the acquisition of the assets of another company (including mergers) in whole or in part,
the acquisition of control over another company,
the acquisition of at least 25% of the capital or voting rights in another company (including the establishment of a joint venture ) and
the acquisition of other significant competitive influence on another company.

In European law, merger control is regulated by the so-called merger control regulation VO 139/2004 / EG (previously VO 4064/89 / EWG). Here, too, there are merger elements. Thereafter, there is a merger if

two or more previously independent companies merge or
one or more companies acquire direct or indirect control over all or parts of one or more other companies through the acquisition of shares or assets, by contract or in any other way (including the establishment of a (full-function) joint venture ).

The merger through the acquisition of the assets of another company is usually referred to as an asset deal , the merger through the acquisition of capital shares or voting rights as a share deal .

The acquirer gains control over another company within the meaning of both German and European competition law, for example, by acquiring ownership of real estate, operating resources, industrial property rights or other assets of the target company, or by having the opportunity to do so to influence the composition of the decision-making bodies of the target company and / or the decision-making therein, or by establishing personal links with the target company.

literature

Ehrenfried Pausenberger: Company mergers . in: Waldemar Wittmann (Hrsg.): Concise dictionary of business administration . Stuttgart 1993, Teilband 3, Sp. 4436-4448, ISBN 3-7910-8033-4 .
Möhlmeier / Wierichs / Wurm: Economic and social processes for industrial clerks . 5th edition, Troisdorf 2005, ISBN 3-8237-6753-4 .
Hartmann / Härter: General economics for commercial trainees . 33rd edition, Merkur Verlag, Rinteln 2002, ISBN 3-8120-0335-X .
Schenk, Hans-Otto / Tenbrink, Hiltrud / Zünddorf, Horst: Concentration in retail . Berlin 1984.
Joachim Zentes / Bernhard Swoboda / Dirk Morschett: Cooperations, alliances and networks . 1st edition, Gabler Verlag, Wiesbaden 2003, ISBN 3-409-11985-X .
Karl M. Popp / Ralf Meyer: Profit from Software Ecosystems: Business Models, Ecosystems and Partnerships in the Software Industry . 1st edition, Books on demand Verlag, Norderstedt 2010, ISBN 3-8391-6983-6 .