Question

Contrast a horizontal merger with a vertical merger, give an example of each, and explain possible sources of synergy.

Answer 1

Merger is combining two companies in to a single largest company

Horizontal mergar: it is combining of companies that operate in the same competitive industry and synergy will be gain in market share and economies for large scale production

Example is the acquisition of Jaguar land rover by Tata motors both are in automobile industry

Vertical merger: combining of companies that offer different services in the supply chain of product or service. Synergies are greater control in supply chain

Acquisition of Romania and baltic forests by ikea as wood is rawmaterial in ikea products by acquiring this company ikea gained more control over its supply chain