merger is a merger between two competitors. Suppose, for example, that
tomorrow Pepsi were to buy Coca-Cola. This would be a horizontal merger.
may negatively affect the competitive situation in an industry.
Therefore, they frequently run afoul of regulatory officials. A
horizontal merger often increases the degree of concentration in an
A vertical merger
occurs when a supplier buys a reseller, or vice versa. The key point is
that the two companies have a buyer-seller relationship.
Suppose that a
jewelry retailer purchased a company that manufactures jewelry. This
would be a vertical merger. Or, suppose that a pharmaceutical company
acquired a drugstore chain. (This in fact happened when pharmaceutical
giant Merck acquired Medico Container Services, Inc.)
are more likely to be approved by regulatory authorities. Consumers can
benefit from the increased efficiencies that result from supply chain
integration--- often in the form of lower prices and/or better service.
merger is a union of two companies that a.) are not competitors, and b.)
not part of the same supply chain. If Microsoft were to purchase a fast
food chain, this would be a conglomerate merger. Software has no
relationship to fast food; fast food has no connection to software
(other than providing sustenance for programmers who work long hours.)