Question

5. Three types of mergers Categorize each of the following examples as a horizontal, vertical, or conglomerate merger. Horizontal Vertical Conglomerate A shoe manufacturer merges with a media and entertainment corporation. A newspaper publisher merges with a paper and pulp mill. In 1999, two large oil companies merged to form a single company.

Answer 1

Answer: Please refer to Explanation

Explanation:

A shoe manufacturer merges with a media and entertainment corporation.

This kind of merger is a CONGLOMERATE MERGER. This is a type of Merger where 2 or more companies merge operations even though they have no evident relationship. A merger is classified here if it is neither Horizontal nor Vertical. At first glance it might make little sense, but such mergers can extend a Company's reach and open up new product lines.

A newspaper publisher merges with a paper and pulp mill.

This is a VERTICAL MERGER. This is a type of Merger that occurs when the parties merging are at different stages in the Supply Chain such as Producer and Distributor. It's main benefit is that it improves efficiency as products can be rolled out faster. In this case, the Newspaper will get paper at a cheaper and faster rate to enable cost reduction in the Newspaper printing section.

In 1999, two large oil companies merged to form a single company.

This is a HORIZONTAL MERGER. As the term implies, this refers to the merging if companies on the SAME LINE so to speak because they sell similar products and cater usually to the same market. This is usually done to reduce competition and corner the market.