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. Horizontal Merger

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

    The acquisition of one company (called the target company) by ...
  6. Vertical Integration

    When a company expands its business into areas that are at different ...
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. Investing

    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, which is the idea that by combining business activities, performance will ...
  4. Investing

    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 steps that need to be successfully completed by two public companies ...
  5. Investing

    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 from person to person and from company to company. However, ...
  6. Stock Analysis

    Breaking Down the Halliburton Baker Hughes Deal

    Halliburton is using a downturn to get bigger and stronger in the long term, and the company is getting Baker Hughes at a reasonable price as a result.
  7. Brokers

    Key Differences Between M&A Advisors And Business Brokers

    For a buy, sale or partnership for one's business, one needs brokers and advisors to proceed ahead. Here are the key differences between business brokers and M&A advisors.
  8. Trading Strategies

    Selecting Mergers & Acquisitions Advisories For Small Businesses

    Mergers and acquisitions advisories aren't just for big players. Many advisory firms cater to small and medium businesses.
  9. Investing

    M&A Advisory Business Boutiques: How The Small Shops Are Capturing Large M&A Deals

    M&A advisory boutiques are becoming a big business, giving large investment banks a run for their money.
  10. Investing

    The Top Reasons Why M&A Deals Fail

    A significant number of M&A transactions result in failure. Here are the top reasons, with examples, of why it happens.

You May Also Like

Hot Definitions
  1. Commodity

    1. A basic good used in commerce that is interchangeable with other commodities of the same type. Commodities are most often ...
  2. Deferred Revenue

    Advance payments or unearned revenue, recorded on the recipient's balance sheet as a liability, until the services have been ...
  3. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  4. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
  5. Simple Interest

    A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate ...
  6. Special Administrative Region - SAR

    Unique geographical areas with a high degree of autonomy set up by the People's Republic of China. The Special Administrative ...
Trading Center