Posted in Finance, Accounting and Economics Terms, Total Reads: 819
Definition: Horizontal Merger
The merger that occurs between two entities in the same industry is known as a horizontal merger. This is a business strategy to consolidate the firms within the same space, even as competitors in the same service or good.
There are 5 types of mergers – horizontal merger, vertical merger, market extension merger, product extension merger, conglomerate merger. This type of merger is usually undertaken by large companies in an industry to take advantage of their knowledge base and realise economies of scale by improving on efficiency. It also leads to reduction in competition and increase in market share. For the same reason large horizontal mergers are considered anticompetitive and are scrutinised by Antitrust law regulators to ensure there in no disadvantage to the consumer due to the merger. The merger of Chrysler and Daimler-Benz is an example of horizontal merger; both are automobile manufacturers and were competitors before the amalgamation.
Example of horizontal v/s vertical merger in the Automobile industry