Horizontal fusion

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Horizontal merger is the integration of two or more companies in the same sector that produce services and goods of the same type under the same personality or management.

These mergers in the business world are common when two or more industries decide to end competition and integrate their organizational structures into one, either through total horizontal integration (pure merger), through the creation of a new brand that unites both, or through a cold integration, through which a single company and legal personality, a single address and the same objectives are constituted, but each company retains its name and part of the organizational culture it possesses.

Horizontal mergers can occur for multiple reasons, although the main ones are usually the following:

  • Increase the products exposed to the market or establish new lines of these. With this, it is possible to give a greater or more differentiated offer to the market.
  • Expand geographically, so that among the sum of all the original companies they can enter new markets that until then, due to their operations, they could not.
  • Reduce competition, since in sectors where competition is less, mergers can be carried out without affecting profitability and strength. Quite the contrary, since in this way large companies are created that have greater decision-making power in the markets over the client.
  • Reduce costs and achieve economies of scale, that is, obtain greater competitiveness and profitability.
Horizontal analysis

Horizontal merger and consumers

Competition agencies tend to pay close attention to these procedures so as not to reduce competition in an industry and not reduce consumer rights against a company that acquires more power.

Thus, on many occasions, depending on the impact on the sector that the merger may have, two or more companies that until now were competitors are not allowed to unify, or it can be allowed, but it is forced to get rid of services, sectors or companies associated, in order not to impair consumer welfare or constitute monopolies.

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