Types of Mergers: Horizontal, Vertical & Concentric

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  • 0:01 Merger
  • 1:15 Horizontal Merger
  • 2:00 Vertical Merger
  • 2:37 Concentric Merger
  • 3:16 Lesson Summary
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Lesson Transcript
Instructor: Jennifer Lombardo
Mergers are endorsed by the government when they do not a create monopolistic environment, and they provide better prices to consumers. In this lesson, you will learn about the three different types of mergers: horizontal, vertical, and concentric.

Merger

Do you think that one day you could be working on the Internet with software made by Moogle, due to a merger between Microsoft and Google? A merger is a combination of two companies that results in a single firm. Not all mergers are approved by the government. The Clayton Antitrust Act allows the government to prohibit any anti-competitive mergers. An example of the power of the Clayton Act can be found in 1996 when Staples and Office Depot agreed to merge, but the FTC blocked the merger, invoking antitrust issues.

A possible merger between Microsoft and Google would probably be deemed anti-competitive by the government as it would create a monopoly for Moogle on Internet browsers, software, Internet software, etc. A monopoly is when a company has exclusive control over selling a product or service. The government does approve many other types of mergers in the business world. In this lesson, you will learn about horizontal, vertical, and concentric mergers through real-life case examples. Let's start with the first type of merger: horizontal.

Horizontal Merger

When two companies from the same industry decide to combine, it is called a horizontal merger. Most horizontal mergers consist of two similar companies within the same industry, which eliminates overall competition. An example of a traditional horizontal merger would be when Exxon and Mobil companies combined to create ExxonMobil, a gas and oil company. In general, horizontal mergers are usually investigated in great detail by the Federal Trade Commission and the Department of Justice to ensure that there will not be a monopoly. This results in consumers paying unfair prices due to one company controlling all of production.

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