Conglomerate merger is different from both vertical and horizontal merger in the sense that it involves merger between two companies that are completely unrelated to one another in terms of products they sell. It is done by the companies which have excess cash but not enough opportunities in the industry in which they operate and hence in order to make use of cash they tend to do conglomerate merger. Also conglomerate merger is done by the companies in order to take advantage of diversification so that company does not have to depend on one business for cash flows. There are two types of conglomerate merger –
1. Financial Conglomerates – Under this merger company provides only cash to the company and do not interfere in the operation aspect of the business, hence company which do financial conglomerate does not intend to run the business rather they are financial investor in the company.
2. Managerial Conglomerate – Under this merger company not only provides finance but also participate in the operations aspect of the business by providing staff as well as management to the company which it is taking over so as to improve the operational efficiency of the company.
Apart from above there can be conglomerate like geographic conglomerate which involves merger between two companies operating in different countries, or merger between companies producing different products which is called product conglomerate.