Vertical Merger

AAA

DEFINITION of 'Vertical Merger'

A merger between two companies producing different goods or services for one specific finished product. A vertical merger occurs when two or more firms, operating at different levels within an industry's supply chain, merge operations. Most often the logic behind the merger is to increase synergies created by merging firms that would be more efficient operating as one.

INVESTOPEDIA EXPLAINS 'Vertical Merger'

In vertical mergers, by directly merging with suppliers, a company can decrease reliance and increase profitability. An example of a vertical merger is a car manufacturer purchasing a tire company. Such a vertical merger would reduce the cost of tires for the automaker and potentially expand business to supply tires to competing automakers.

RELATED TERMS
  1. Economies Of Scale

    The cost advantage that arises with increased output of a product. ...
  2. Diversification Acquisition

    A corporate action in which a company purchases a controlling ...
  3. Congeneric Merger

    A type of merger where two companies are in the same or related ...
  4. Vertical Integration

    When a company expands its business into areas that are at different ...
  5. Horizontal Merger

    A merger occurring between companies in the same industry. Horizontal ...
  6. Hostile Takeover

    The acquisition of one company (called the target company) by ...
RELATED FAQS
  1. How long does it take for a merger to go through?

    Corporate mergers and acquisitions can vary considerably in the time they take to be completed. There are a number of individual ... Read Full Answer >>
  2. What is a typical day in the life of someone in M&A? How long does a project last?

    The life of a financial professional involved in the field of mergers and acquisitions can, like any line of work, vary considerably ... Read Full Answer >>
  3. Why do companies merge with or acquire other companies?

    Some of the reasons for mergers and acquisitions (M&A) include: 1. Synergy: The most used word in M&A is synergy, ... Read Full Answer >>
  4. How can a company resist a hostile takeover?

    Several different defense strategies can be applied by existing corporate boards to ward off a hostile takeover. The most ... Read Full Answer >>
  5. How does a letter of intent work in the context of mergers and acquisitions?

    A letter of intent, or LOI, is used to set forth the terms of a proposed merger or acquisition. It is usually the first step ... Read Full Answer >>
  6. What happens to the shares of a company that has been the object of a hostile takeover?

    The shares of a company that is the object of a hostile takeover rise. When a group of investors believe management is not ... Read Full Answer >>
Related Articles
  1. Fundamental Analysis

    Mergers And Acquisitions: Understanding Takeovers

    In the dramatic world of M&As, battleground terms meld with bizarre metaphors to form the language of the game.
  2. Insurance

    The Wonderful World Of Mergers

    While acquisitions can be hostile, these varied mergers are always friendly.
  3. Economics

    What is a Management Buyout?

    A management buyout, or MBO, is a transaction where a company's management team purchases the assets and operations of the business they manage.
  4. Fundamental Analysis

    Explaining Enterprise Multiple

    The enterprise multiple is a ratio used to value a company as if it was going to be acquired.
  5. Chart Advisor

    3 Basic Material Stocks Poised For A Pop

    After large market swings such as the one seen on March 30, 2015, it is not surprising to see traders become more tolerant towards taking on risk.
  6. Stock Analysis

    Will Kraft-Heinz Be a Winner?

    Kraft and Heinz are now one. This should present a profitable long-term investment opportunity, but isn't likely to be smooth sailing at first.
  7. Investing

    WhatsApp: The Best Facebook Purchase Ever?

    WhatsApp is Facebook's largest acquisition to date. What makes it worth the major price tag?
  8. Fundamental Analysis

    Private vs Public Equity: What's Best?

    What is the better way for a company to attract investors; by making its stock available for sale to whoever wants some, or by petitioning rich people?
  9. Investing News

    Sun Pharma And Ranbaxy: An Ideal Pharma Marriage?

    The Sun Pharma merger with Ranbaxy will blend the complementary market strengths and areas of expertise of each company and create a powerful pharma force.
  10. Investing

    Facebook's Most Important Acquisitions

    Strategic acquisitions have been key to Facebook's growth and success, and the company has acquired more than 50 companies or properties since it's formation in 2004.

You May Also Like

Hot Definitions
  1. Fisher Effect

    An economic theory proposed by economist Irving Fisher that describes the relationship between inflation and both real and ...
  2. Fiduciary

    1. A person legally appointed and authorized to hold assets in trust for another person. The fiduciary manages the assets ...
  3. Expected Return

    The amount one would anticipate receiving on an investment that has various known or expected rates of return. For example, ...
  4. Carrying Value

    An accounting measure of value, where the value of an asset or a company is based on the figures in the company's balance ...
  5. Capital Account

    A national account that shows the net change in asset ownership for a nation. The capital account is the net result of public ...
  6. Brand Equity

    The value premium that a company realizes from a product with a recognizable name as compared to its generic equivalent. ...
Trading Center