What type of merger would be represented by a merger of Coca Cola and Pepsi Co?

NEW DELHI: Rivals Coca-Cola and PepsiCo have come together along with other beverages makers and bottlers to form the Indian Beverage Association (IBA), which will be the industry’s single point of interaction with the government and help companies comply with food safety guidelines and other regulations.

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What is a vertical merger example?
What is the difference between a horizontal merger and a vertical merger examples?
What is an example of a conglomerate merger?
What are the 3 types of mergers?

Juices maker Dabur, packaging company Tetra Pak, bottling companies Pearl Drinks and Bengal Beverages, energy drink maker Red Bull, and drip and sprinkler systems firm Jain Irrigation Systems too have joined the association, while about 30-40 others including Bisleri International, Parle Agro, Amul, Godrej, bottlers, vendors and suppliers are expected to join in due course.

“Non-alcoholic beverages are on a growth trajectory but so far there has not been a comprehensive organization representing the industry. We felt it’s time,” said Arvind Varma, secretary general of the association.

He said the organisation will be the non-alcoholic beverages industry’s single point of interaction with the food safety authority and ministry of health.

It will help members deal with challenges like complying with the food safety authority guidelines, double taxation, VAT, state-level controversies like allegations of water depletion (as is the case with Coca-Cola and PepsiCo), sugar imports, spurious drinks and more.

“IBA’s formation has been triggered by the two cola companies, Coca-Cola and PepsiCo, since they are the one’s facing maximum flak from regulators — whether it’s VAT in Delhi, charges of water depletion in Kerala or being perceived as only making sugary fizzy drinks by health activists,” said an official directly involved with the association.

Earlier this year, the Delhi government increased VAT on soft drinks from 12.5% to 20% on the category, but companies have not increased prices for fear of impacting demand. They have been lobbying with Delhi CM Shiela Dixit for a rollback because they believe the current taxation would ‘reverse their growth cycle’.

Several beverage makers, bottlers and suppliers ET spoke to said they would join the IBA.

The Indian Soft Drinks Manufacturers Association (ISDMA), represented by the two cola companies, is also being merged with the IBA.

“We are in the process of inviting all affiliates and stakeholders of the non-alcoholic beverages industry to join us,” said CK Jaipuria, president of IBA’s managing committee and a leading bottler of PepsiCo.

The IBA is being set up on the lines of global organisations such as American Beverage Association (which represents 220,000 people accounting for over $110 billion of sales) and British Soft Drinks Association.

The American Beverage Association (ABA) represents beverage producers, distributors, franchise companies and support industries, which make regular and diet soft drinks, packaged water, juices and juice drinks, sports and energy drinks and ready-to-drink teas.

Juices makers expect the IBA to help them expand their market.

“We hope fiscal benefits to the packaged juices sector will continue. Tapping the potential in packaged juices is a long-term effort and we need the government support to do so,” said Dabur CEO Sunil Duggal.

The juice and juice-drinks market is estimated at about 660 million cases by volume, of which packaged juices have only captured 90 million cases.

Energy drinks makers also need a lobby to push the authorities to set the guidelines for the industry.

BOCA RATON, Florida (Reuters) - PepsiCo Inc PEP.N said on Wednesday that shareholders of both Pepsi Bottling Group Inc PBG.N and PepsiAmericas Inc PAS.N approved its proposed merger, paving the way for the snack and soft-drink maker to acquire its two largest bottlers.

More than 81 percent of the combined voting power of Pepsi Bottling common and Class B shares voted in favor of the merger, while 86.5 percent of PepsiAmericas votes were in favor of the merger, PepsiCo said.

The maker of Pepsi-Cola and Frito-Lay snacks said it hoped to close the deals by the end of February.

Reporting by Martinne Geller; Editing by Lisa Von Ahn

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April 15 2022 Written By: EduPristine

Hey there! Welcome back again. In the previous blog, we discussed what are mergers and acquisitions. In this blog, we will be covering the types of mergers. Did you know that the term chosen to describe a merger may depend on the economic function, the purpose behind the business transaction, and the relationship among the merging companies? Let us now see the various types of mergers.

The types of mergers are namely

Horizontal mergers
Vertical mergers
Conglomerate mergers
Market Extension mergers
Product or Congeneric Extension mergers
Accretive mergers

Horizontal Merger:

Horizontal merger is one type of merger that operates between two or more companies that are offering similar products or services.
These organizations usually work within the same space or industry. Such mergers are more common in industries that have fewer enterprises offering the same product.
Let us understand better with the help of an example, a merger between Coca-Cola and Pepsi would be horizontal. The nature of the business operations can be very similar.
Plenty of opportunities can be availed by pooling the resources that help in increasing the manufacturing of units and reducing the costs.

Vertical Merger:

Vertical merger is another common type of merger. Vertical mergers are simple but very common.
The main reason behind such mergers is to increase the synergies that are created by merging firms that would result in being more efficient by operating as one.
To summarize, in simple words, a vertical merger joins two companies that may not be direct competitors but exist under the same supply chain.
A classic example that can be given would be eBay and PayPal. As we all know, eBay is an online shopping and auction platform, whereas PayPal provides services to ease the transfer of money, enabling users to make online payments.
Though the services offered by both are quite different, a merger helped eBay in increasing the number of transactions which indeed proved to be a great strategic decision overall.

Conglomerate Merger:

Conglomerate merger is a type of merger that is involved in totally unrelated business activities.
Did you know that conglomerate mergers are also of two types? Yes, they are known as pure and mixed.
Pure conglomerate merger refers to those mergers that have nothing in common. Mixed mergers refer to those mergers that are either looking for product extensions or market extensions.
One such example of a conglomerate merger would be of Walt Disney Company and the American Broadcasting company.
Other recent examples of conglomerate mergers include Amazon and whole foods, Disney and Pixar, etc.

Market Extension Merger:

A market extension merger operates between two companies, where one company wants to penetrate a new or unknown market by merging with another organization that offers the same product or service, having an established market share.
In other words, a market extension merger takes place between two companies that deal with the same products but in separate markets.
Such mergers are carried out to increase market share and client base. One historic example of a market extension merger is that of Pizza Hut by Pepsi Co.
Pepsi observed and very clearly understood that people went to Pizza Hut, and hence the idea to merge with them. This helped Pepsi in reaching a wider market.
This merger took place long back in 1977, and within a year, sales nearly went up to $436 million, helping pizza hut to open a new headquarter, which is valued at $10 million.

Product or Congeneric Extension Merger:

Product extension mergers operate between two or more companies that deal with related products, present in the same market, but do not have a competitive supplier or customer relationship.
Product extension merger enables merging companies to group their products, share expertise, technology, designs, as well as gain access to a much bigger set of customers. In turn, this helps in acquiring the required potential to lead to much higher profits.
The example of Pizza Hut and Pepsi that was discussed at the above point can also be considered here.

Accretive Merger:

When one company acquires another company and the transaction increases the first company’s earnings per share, the deal is called an accretive merger.
Such a merger focuses on addressing and combining the different cultures. A way to calculate this is to note the price-earnings ratio (the ratio between the company’s price per share compared to its per-share earnings per year) between the acquiring firm and the targeted firm.
On the other hand, when one company acquires another company, and the transaction decreases the previous company’s earnings per share, then the deal is called a dilutive merger.

If you found this interesting and want to learn about this topic known as mergers and acquisition, then you must take up the Financial Modeling course as your next career option. Financial Modeling and valuation would help you become an expert and would help in transforming directly from a beginner to a pro in excel which is a widely used tool in the corporate world. The Financial Modeling course in India can be pursued by anyone interested in creating various financial models and thus making it ideal for all the professionals at every level, including CA, CFA’s, MBAs, and other graduates as well.

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What is a vertical merger example?

What Are Vertical Mergers? A general definition of a vertical merger is the merger of two companies that occupy different parts of the same supply chain. A factory, for example, might merge with a wholesaler, or a wholesaler might merge with a retailer.

What is the difference between a horizontal merger and a vertical merger examples?

In Conclusion Mergers are often defined as either horizontal or vertical. A horizontal merger occurs when two competing companies join together to form a single company, whereas a vertical merger occurs when two companies in different stages of production join together to form a single company.

What is an example of a conglomerate merger?

Some famous conglomerate mergers of recent times include Amazon and Whole Foods, eBay and PayPal, and Disney and Pixar.

What are the 3 types of mergers?

The three main types of merger are horizontal mergers which increase market share, vertical mergers which exploit existing synergies and concentric mergers which expand the product offering.