Q:

Can you give me some examples of vertical mergers?

A:

Quick Answer

A vertical merger involves companies at different stages of production, and recent examples of such mergers include the 2008 acquisition of Tele Atlas by its fellow Dutch firm, TomTom and the merger between Google and Double-Click. At the time of acquisition, TomTom was the world's largest manufacturer of car navigation systems, and the company wanted to use Tele Atlas' digital map data to provide real-time updates to its sat-nav systems.

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Full Answer

According to the Houston Chronicle, the benefits associated with vertical mergers include negotiating deals, paying full market prices and helping the company to gain crucial access to important supplies, which reduces the overall cost by eliminating the costs of finding suppliers. Vertical mergers can be used to increase a company's efficiency by synchronizing production and supply between the two companies, making supplies easily available when they are needed. Vertical mergers can also be used to reduce competition in the market by making it difficult for competitors to access crucial supplies, which weakens them and may prevent entry into the market by other companies.

About.com warns that a vertical merger can easily lead to anti-trust cases within a market by reducing competition. An appropriate example given is a scenario where a car manufacturer buys other businesses that exist along its supply chain.

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