|Industry Life Cycle Stage
|Motives for Merger
|Types of Mergers
|Industry exhibits substantial development costs and has low, but slowly increasing, sales growth.
|Younger, smaller companies may sell themselves to larger companies in mature or declining industries looking for ways to enter into a new growth industry.
Young companies may look to merge with companies that allow them to pool management and capital resources.
|Rapid accelerating growth
|Industry exhibits high profit margins caused by few participants in the market.
|Explosive growth in sales may require large capital requirements to expand existing capacity.
|Industry experiences a drop in the entry of new competitors, but growth potential remains.
|Mergers may be undertaken to achieve economies of scale, savings, and operational efficiencies.
|Stabilization and market maturity
|Industry faces increasing competition and capacity constraints.
|Mergers may be undertaken to achieve economies of scale in research, production, and marketing to match the low cost and price performance of other companies (domestic and foreign).
Large companies may acquire smaller companies to improve management and provide a broader financial base.
|Deceleration of growth and decline
|Industry faces overcapacity and eroding profit margins.
|Horizontal mergers may be undertaken to ensure survival.
Vertical mergers may be carried out to increase efficiency and profit margins.
Companies in related industries may merge to exploit synergy.
Companies in this industry may acquire companies in young industries.