What is the difference between a horizontal and vertical business combination?
The key difference is that each company operates in a different phase or stage of the supply chain. A horizontal business combination occurs when a company acquires another company in the same industry or vertical, and that company is in the same phase of the supply chain (both companies manufacture cars).
A vertical business combination would occur when the companies are in the same industry or vertical, but they operate in different phases of the supply chain (one manufactures cars, while the other sells cars).
There are a number of pros and cons to each type of business combination. Many economists believe that companies should seek to horizontally and vertically integrate. Business combinations can draw a lot of scrutiny from regulators, especially if they result in monopolies.
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