Risle Incorporated is a paper supply company. One of its largest customers is Allende Publishers, a publishing house that makes books. If Risle Incorporated decides to acquire and merge with Allende, the merger is most likely to be called a vertical merger.
What is vertical merger?
A vertical merger is the union of businesses that operate at various phases of the production process, such as raw materials, finished goods, and distribution. A merger between a steel manufacturer and an iron ore producer serves as an illustration.
Some characteristics of vertical merger are-
- A vertical merger is when two or more businesses come together to provide various supply chain services for a single item or service.
- Most frequently, a merger is implemented to boost business, get more control over the supply chain process, and create synergies.
- Usually, a manufacturer and a supplier are involved. Contrarily, a competitor in the same industry as the purchasing company is acquired in a horizontal merger.
- A vertical merger's primary goals are to gain market share, boost productivity, and maximize cost reductions in order to generate larger profits.
- An example of a vertical merger would be an automaker combining with a parts supplier.
- A arrangement like that would give the car division better access to parts pricing and increased manufacturing process control.
- In turn, the components section would be ensured a consistent flow of business.
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