Horizontal Merger

A horizontal merger occurs when two companies at the same level of production and distribution join together.

Key features of a horizontal merger:

• Two companies operating at the same level of production and distribution.
• Two companies with similar products or services.
• Control of a significant market share.
• May lead to economies of scale.
• May lead to market dominance.

Examples of horizontal mergers:

• Ford Motor Company and General Motors Inc. merging to create the Ford Motor Company.
• Microsoft and Nokia merging to create Microsoft Nokia Mobile.

Benefits of horizontal mergers:

• Increased market share: Horizontal mergers can give the combined company a larger market share, which can lead to economies of scale and greater profitability.
• Access to new technology or markets: Horizontal mergers can give the combined company access to new technology or markets, which can help it to grow.
• Cost savings: Horizontal mergers can lead to cost savings through economies of scale and duplication of functions.

Drawbacks of horizontal mergers:

• Antitrust issues: Horizontal mergers can raise antitrust issues, which can lead to regulatory approval delays or even sabotage.
• Market foreclosure: Horizontal mergers can lead to market foreclosure, which can limit consumer choice.
• Reduced innovation: Horizontal mergers can lead to reduced innovation, as the combined company may not be as motivated to invest in new technologies.

Conclusion:

Horizontal mergers are a type of merger in which two companies at the same level of production and distribution join together. They can offer a number of benefits, but also have some drawbacks. It is important to weigh the pros and cons of a horizontal merger before deciding whether or not to pursue it.