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Vertical Merger

A vertical merger is a combination of two companies that operate at different stages of the production process for a specific product or service. This type of merger typically involves a company merging with its supplier or distributor, allowing for greater control over the supply chain, cost efficiencies, and improved coordination between the different stages of production or distribution. Vertical mergers differ from horizontal mergers, which involve companies at the same stage of production.

Example

A car manufacturer merges with a steel supplier, forming a vertical merger that allows the manufacturer to reduce supply chain costs and improve production efficiency.

Key points

• A merger between two companies that operate at different stages of the same supply chain.

• Allows greater control over production, distribution, and costs.

• Often results in improved efficiency and coordination between different stages of the production process.

Quick Answers to Curious Questions

It allows companies to control more of their supply chain, leading to cost savings, greater efficiency, and improved coordination between production and distribution.

A vertical merger involves companies at different stages of the production process, while a horizontal merger involves companies at the same stage.

They provide cost savings, enhance supply chain control, and reduce dependency on external suppliers or distributors.