Market Extension Merger, Product Extension Merger

July 16, 2010Mergers and Acquisitionsby EconomyWatch


Market extension merger and product extension merger are the two basic types of mergers. These two mergers have become very common in the modern day financial market. These have also become very important as more companies are looking at extending the base of their operations as well as the range of products and services they deal in.

Market Extension Merger

As per definition, market extension merger takes place between two companies that deal in the same products but in separate markets. The main purpose of the market extension merger is to make sure that the merging companies can get access to a bigger market and that ensures a bigger client base.

Example of Market Extension Merger

A very good example of market extension merger is the acquisition of Eagle Bancshares Inc by the RBC Centura. Eagle Bancshares is headquartered at Atlanta, Georgia and has 283 workers. It has almost 90,000 accounts and looks after assets worth US $1.1 billion.

Eagle Bancshares also holds the Tucker Federal Bank, which is one of the ten biggest banks in the metropolitan Atlanta region as far as deposit market share is concerned. One of the major benefits of this acquisition is that this acquisition enables the RBC to go ahead with its growth operations in the North American market.

With the help of this acquisition RBC has got a chance to deal in the financial market of Atlanta , which is among the leading upcoming financial markets in the USA. This move would allow RBC to diversify its base of operations.

Product Extension Merger

According to definition, product extension merger takes place between two business organizations that deal in products that are related to each other and operate in the same market. The product extension merger allows the merging companies to group together their products and get access to a bigger set of consumers. This ensures that they earn higher profits.

Example of Product Extension Merger

The acquisition of Mobilink Telecom Inc. by Broadcom is a proper example of product extension merger. Broadcom deals in the manufacturing Bluetooth personal area network hardware systems and chips for IEEE 802.11b wireless LAN.

Mobilink Telecom Inc. deals in the manufacturing of product designs meant for handsets that are equipped with the Global System for Mobile Communications technology. It is also in the process of being certified to produce wireless networking chips that have high speed and General Packet Radio Service technology. It is expected that the products of Mobilink Telecom Inc. would be complementing the wireless products of Broadcom.

Difference between Market Extension Merger and Product Extension Merger

The difference between market extension merger and product extension merger lies in the fact that the later is meant to add to the existing variety of products and services offered by the respective merging companies; while, in case of the former the two merging companies are dealing in similar products.

In case of the market extension merger the two merging companies are operating in the same market and as far as product extension merger is concerned the two merging companies are operating in different markets.

blog comments powered by Disqus