vertical merger


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Vertical merger

When one firm acquires another firm that is in the same industry but at another stage in the production cycle. For example, the firm being acquired serves as a supplier to the firm doing the acquiring.

Vertical Merger

A merger between two companies in the same industry but at different stages of the production cycle. A vertical merger can reduce the costs of the two companies by eliminating redundant processes. It also reduces reliance of one company on another. For example, an upstream oil company can merge with a downstream oil company to streamline operations.

vertical merger

A merger between two firms involved in the same business but on different levels. As an example, an automobile company may purchase a tire manufacturer or a glass company. The merger permits the firm to gain more control of another level of the manufacturing or selling process within that single industry. Compare horizontal merger.

vertical merger

A merger between companies that supply different goods or services but in a common industry.

References in periodicals archive ?
Two Barclays analysts, Kannan Venkateshwar and Amir Rozwadowski, called the government's threat to block the deal "unprecedented" and said they were "perplexed" given the Justice Department's long-standing leniency toward vertical mergers.
courts--possibly under the influence of leading economists who believed that vertical integration reduces competition by foreclosing competitors (100)--were even more hostile to vertical mergers and acquisitions than their predecessors had been, (3) in the 1970s, the Supreme Court justified its condemnation of a vertical merger in the last such case it has heard (101) with an argument that is a "cousin" of the foreclosure argument--viz.
Spiller (1985) suggests that "site specific assets can increase the viability of a vertical merger .
Lubatkin (1983) suggests that vertical mergers will most likely benefit from the schedule economies where two levels of production at two stages of a value chain are merged.
In this case, it can be shown that a vertical merger does not change the seller's production capacity report, but it does cause the merged firm to overstate its consumption capacity.
Jonathan Baker, Comcast-NBCU: The FCC Provides a Roadmap for Vertical Merger Analysis, 25 Antitrust 36, 38 (2011).
These guidelines in particular outline the circumstances under which a vertical merger could be likely to result in competing companies being denied access to an important supplier or facing increased prices for their inputs and "thus ultimately lead to higher prices for consumers".
In the market approach, vertical mergers are viewed as an instrument to harm competition by denying competitors the access to either a supplier or a buyer of input (foreclosure).
Although firms have a variety of motives for vertical merger and other vertical restrictions, a traditional issue, which permeates much of the literature on vertical integration, is how the existence of horizontal market power in one or more vertically-related industries creates motives for them to vertically integrate [13, 187-89].
4880 with an increase of one standard deviation in horizontal and vertical merger activity, respectively.
A necessary but not sufficient condition for anticompetitive foreclosure is that the vertical merger cause the unintegrated rivals to be less profitable.
amp; Pol'y, 1455 (2008), who concluded that "[A] key consideration in determining optimal vertical merger policy is the economic presumption, on both theoretical and economic grounds, that vertical mergers are likely efficiency enhancing and beneficial for consumers.