vertical merger

Discipline: Economics

The merging of two firms whose production lines are subsequent to one another.

One example would be the merging of Firm A and Firm B, where Firm A buys raw materials, and produces unfinished products, and Firm B buys the same kind of unfinished products, and produces finished products.

The objectives of vertical mergers include reducing costs, and decreasing reliance on vendors.

Unlike vertical acquisitions, vertical mergers necessarily involve two companies merging together, and becoming one entity.

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