Horizontal Mergers

Topics: Vertical integration, Strategic management, Monopoly Pages: 3 (907 words) Published: September 16, 2013
Mergers occur when one business firm buys or acquires another business firm (the acquired firm) and the combined firm maintains the identity of the acquiring firm. Business firms merge for a variety of reasons, both financial and non-financial. There are a number of types of mergers. Horizontal and non-horizontal are just two of many types. WHAT IS HORIZONTAL MERGER?

A merger occurring between companies in the same industry. Horizontal merger is a business consolidation that occurs between firms who operate in the same space, often as competitors offering the same good or service. Horizontal mergers are often a type of non-financial merger. In other words, a horizontal merger is undertaken for reason that have little to do with money, at least directly. Simply stated, a horizontal merger is usually the acquisition of a competitor who is in the same line of business as the acquiring business. By acquiring the competitor, the acquiring company is reducing the competition in the marketplace. Suppose, for example, that Pepsi were to buy Coca-Cola. This would be a horizontal merger. Horizontal mergers are common in industries with fewer firms, as competition tends to be higher and the synergies and potential gains in market share are much greater for merging firms in such an industry. Many businesses use this strategy when one is failing to perform. They merge as a last ditch effort to keep from going completely out of business. NON-HORIZONTAL MERGER

A non-horizontal merger is the opposite of horizontal mergers. A merger between companies in different industry. It is a business consolidation that occurs between firms who operate in different space offering different goods and services. They involve firms who do not operate in the same market. It necessarily follows that such mergers produce no immediate change in the level of concentration in any relevant market. Although non-horizontal mergers are less likely than horizontal mergers to create competitive...
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