Economists believe that many or even most mergers (or acquisitions) between two purely vertically related firms will not have negative impacts on consumers and may benefit consumers. Other than economies of scale or scope that is also present with horizontal mergers, what might explain this often-favorable view of vertical mergers

Question

Belen Buckley

Business

8 April, 20:10

Economists believe that many or even most mergers (or acquisitions) between two purely vertically related firms will not have negative impacts on consumers and may benefit consumers. Other than economies of scale or scope that is also present with horizontal mergers, what might explain this often-favorable view of vertical mergers

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Camron Duran · Answer 1

The answer is below

Explanation:

Vertical merger is a business term, that describes the acquisition of one or more firms by another firm, in which the firms involved are not in direct competition.

In other words, it is a situation where by, a firm acquires a supplier or distributor. A vertical merger, is considered to result to reduced cost and increment in productivity of the firm that acquires other firm.

Benefits of Vertical Merger.

1. Operational Improvements: one of the benefits vertical mergers, is in operational improvements, such that, as the reduction in cost, the delay in delivery of supplies will be greatly reduced or outrightly eliminated. It could also created avenue or marketing opportunity in supplying materials to competitors or other firms

2. Financial Synergies: this implies that, vertical merger could increase the company access to capital, funds, or credit facility from banks, which can be used in smooth running of the firm.

3. Management Efficiencies: vertical merger can leads to reduction in the cost and running of executives, such that, the inefficient personnels are removed and at the same time, increase the overall operations and commun of the excutives.