Three Types Of Vertical Mergers: Vertical Mergers

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Vertical Mergers: A vertical merger is a merger in which one firm supplies its products to the other. A vertical merger results in the consolidation of firms that have actual or potential buyer-seller relationships. The firms in vertical mergers operate at different stages of production process where buyer-seller relation or manufacturing at different stages of the same product is possible (Gaughan, 2007). There are two types of vertical mergers. (i) ‘Backward or upstream vertical integration’ in which the primary motive is usually to move towards a dependable source of supply. Dependability can be determined not just in terms of supply availability, but also through quality maintenance and timely delivery considerations. Having timely access …show more content…

Conglomerate mergers result in joining of firms which compete in different product markets, and which are situated at different production stages of the same or similar products. That is to say, neither the products nor the inputs of these merging firms are the same. Conglomerate mergers result in significant advantages gained by the merging firms since they are the fastest means of entry into different activity fields in the shortest possible time span. Moreover, they reduce the financial risks by “not putting all the eggs in one basket” (Gaughan, 2007). There are three types of conglomerate mergers: (i) Product Extension: In this type of mergers, firms that sell non-competing products and use related marketing channels of production processes merge. (ii) Market Extension: In such mergers, merging firms manufacture the same products or services but market them in different territorial markets. That is to say: it is a merging of two firms selling competing products in separate geographic markets. In this way the firms get the opportunity to market their products in a wider range. (iii) Pure Conglomerate Mergers: In such mergers, there is no relationship between firms neither in respect to manufacturing nor in respect to marketing and mergers are realized between firms operating in entirely different

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