What is a horizontal merger?
While mergers and acquisitions are often seen as vertical transactions between companies that operate in different industries, two companies within the same industry or similar businesses will sometimes join forces to create a more efficient and powerful entity. This allows for more efficiency through economies of scale as well as increased market power which can be used against other firms or sectors with low-cost production capabilities - it also provides an opportunity to exploit synergies between individual departments within each business entity by utilizing their expertise best suited towards specific tasks no matter how unrelated they may seem at first glance! This process also reduces competition in the marketplace and allows for greater market share than either companies could achieve on their own.
How does it work?
A horizontal merger does not involve any cash exchange and instead they are done for reasons that have little or nothing financial involved in them at all - usually because reducing competition between competitors makes one company more powerful than their rivals will be able to become if left unchecked by increased focus on just themselves alone.
The goal of a horizontal merger is to create more value for the company. In order for this principle to work, it must be proven that 1 + 1 will always equal more than 2 - especially when there are two independent entities before combining them into one entity with increased capabilities and opportunities. This tends toward reducing competition in an industry through lowered prices on goods/services offered due to less fierce bidding wars between retailers which will eventually lead up towards higher revenue shares at best case scenarios
What is a vertical merger?
Vertical mergers are when one business acquires another that belongs to the same supply chain. Vertical integration refers broadly speaking, to any situation where two companies join forces and attempt an acquisition in order for them both not be left out from each other's markets or opportunities ahead of time - it can also involve purchasing raw materials from below your company up until its production stage. This can be a difficult term for some people, but essentially means there will always need to be some level of integration between companies in different stages along any given production process (between those who buy or sell something).
How does it work?
Vertical mergers are usually conducted to increase efficiency along the supply chain which, in turn, increases profits for acquiring companies. Unlike horizontal acquisitions where two businesses may compete with each other directly by buying their competition; vertical combinations result only from aggressive strategies that seek greater market share through integrating operations across various industries and sectors-never taking any competing business offline completely but instead just increasing its size (and maybe even enhancing quality).
This type of merger has been criticized heavily because it can lead not just towards higher prices on goods/services offered—though this does happen sometimes-but also increased costs down stream such as at retail level if consumers don't have enough competitors locally and these mergers usually result into antitrust problems because there is now less competition between these companies involved within the same industry sector.