Horizontal merger is a merger of two businesses operating in the same industry it is a merger of competitors and is also called horizontal integration the basic motive behind horizontal merger is to gain from the economies of scale generated when a business operate at a higher production level. Define horizontal merger horizontal merger synonyms, horizontal merger pronunciation, horizontal merger translation, english dictionary definition of horizontal merger n the purchase by a company of a competitor or of a company dealing in similar products or services. Horizontal and vertical mergers are two strategies your company can use to achieve specific objectives, such as growing your business, entering new markets, increasing revenue or reducing costs. A horizontal merger is the combination of two firms in the same industry a merger between the firms allows them to combine product lines and achieve a higher combined market share within the industry this approach may lead to economies of scale , especially if the production processes of the.
The three types of mergers are horizontal, vertical and conglomerate types of mergers will vary according to the nature of the industry and the degree of fragmentation the motives for merging are different in managerial and owner-controlled firms: the former may be more concerned with increasing the growth rate of the firm, while owners are. This section draws upon the views and findings of several researchers relevant to the question which this paper hopes to address if analysis concerns only competitive effects, economists mainly predict that horizontal mergers may lead to unilateral effects and decrease consumer welfare. 1 introduction the relationship between mergers and innovation is an important question in competition policy, as it is well-established that innovation is one of the main determinants of long-term growth and consumer welfare.
What is a 'horizontal merger' a horizontal merger is a merger or business consolidation that occurs between firms that operate in the same industry competition tends to be higher among companies. A monopoly formed by horizontal merger is known as a horizontal monopoly normally, a monopoly is formed by both vertical and horizontal mergers horizontal merger is that condition where a company is involved in taking over or acquiring another company in similar form of trade. Because mergers occur in the face of an incipient price war, mergers are therefore rare–pre-merger collusion is the normal state of the firms empirical studies of collusion typically focus on mergers and post-merger outcomes, not pre-merger collusion. Conglomerate mergers and congeneric mergers are two types of business combinations with different characteristics from horizontal and vertical mergers horizontal mergers involve two competitors merging vertical mergers involve a buyer and a seller merging.
Horizontal mergers may not only suppress negative pricing externalities between rival firms, but also negative innovation externalities therefore, mergers between rival innovators tend to reduce innovation incentives unless there are sufficient knowledge spillovers or other efficiencies. Gregory j werden, unilateral competitive effects of horizontal mergers i: basic concepts and models, in 2 issues in competition law and policy 1319 (aba section of antitrust law 2008) gregory j werden & luke m froeb, unilateral competitive effects of horizontal mergers ii: auctions and bargaining , in 2 issues in competition law and policy. Abstract this paper tests the hypothesis that horizontal mergers generate positive abnormal returns to stockholders of the bidder and target firms because they increase the probability of successful collusion among rival producers. These guidelines replace the horizontal merger guidelines issued in 1992, revi sed in 1997 they reflect the ongoing accumulation of experience at the agencies the commentary on the horizontal merger guidelines issued by the agencies in 2006 remains a valuable supplement to these guidelines these guidelines may be revised from time to.
A vertical merger involves companies at different stages of production, and recent examples of such mergers include the 2008 acquisition of tele atlas by its fellow dutch firm, tomtom and the merger between google and double-click. Horizontal merger, when two companies from the same industry decide to combine vertical merger is when two companies combine that are in different stages of the supply chain. Disney's acquisition of pixar or the merger of exxon and mobil are both great examples of horizontal integration in both examples, two companies of similar size and operation, operating in the.
1 introductionthis paper provides a theoretical contribution to the analysis of horizontal mergers under the assumption of cournot competition, by extending the results of farrell and shapiro (1990) and werden and froeb (1998)the result presented below establishes that if an industry is characterized by (i) homogeneous products, (ii) quantity competition, and (iii) increasing or mildly. The ftc and the doj have developed horizontal merger guidelines that set out the agencies' analytical framework for answering that key question, and have provided a commentary on the horizontal merger guidelines that provides many specific examples of how those principles have been applied in actual mergers reviewed by the agencies. Horizontal merger is a merger between firms that are selling similar products in the same market the bank merger of 1980s and the merger of hp and compaq are examples of horizontal merger a horizontal merger decreases competition in the market.
Horizontal mergers are a type of non-financial merger in other words, a horizontal merger is undertaken for reasons that have little to do with money, at least directly simply stated, a horizontal merger is usually the acquisition of a competitor who is in the same line of business as the acquiring business. Strictedtoprofitablemergers,thisisnolongertrue:afterageneralmodelof quantitycompetition is developed (section 22), the main resultof thepaper, stated in section 23, establishes indeedthatsuchmergers necessarilyraise. Conjectured that horizontal mergers should result in an increase in equilibrium prices, for all of the products offered by the industry this was assumed, for example, in the classical paper by williamson (1968. The 2010 us horizontal merger guidelines: a historical and international perspective by rachel brandenburger and joseph matelis in august 2010, the us department of justice and the us federal trade commission issued the first comprehensive revision to the us horizontal merger guidelines in eighteen years.