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Horizontal Merger

A horizontal merger occurs when two companies operating in the same industry and at the same level of the supply chain combine to form a single entity. Horizontal mergers are typically pursued to achieve economies of scale, increase market share, and reduce competition. By merging, companies can pool resources, reduce costs, and expand their product or service offerings. However, horizontal mergers may also face scrutiny from regulators concerned about reduced competition and potential monopolistic behavior.

Example

Two large telecommunications companies merge to increase their market share and reduce competition in the industry, forming a single, more powerful entity.

Key points

• Involves the merger of two companies in the same industry and supply chain level.

• Aims to achieve economies of scale, reduce competition, and increase market share.

• May face regulatory challenges due to concerns about monopolistic behavior.

Quick Answers to Curious Questions

Companies can achieve economies of scale, reduce operational costs, increase market share, and strengthen their competitive positioning.

Risks include potential regulatory hurdles, cultural clashes between merging companies, and integration challenges that may offset the expected benefits.

Horizontal mergers reduce competition within the industry, which may lead to higher prices for consumers and concerns about monopolistic practices.