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M&A is categorized into horizontal and vertical M&A according to the interactive relation between company industries which participate in merger and acquisition

Time:2016-6-7    1663 View
A.Horizontal mergers and acquisitions
It happens in the line of business which are competitive and in same business fields or produce same products. The result is that capital concentrates in the same production, sales field or sector, thus superior enterprises merger inferior ones and become trust, which expand the production scale to reach the best scale under the condition of new technology. Its purpose is to diminish competition, expand market share, strengthen the monopoly power of acquiring company or form scale effect, and cancel the repeated construction, supply series of products and save effectively. Horizontal merger and acquisition is the most common way, however, it, especially the big companies’ merger and acquisition, easily undermines competition and forms industry highly monopoly situation. Many countries pay close attention to and strictly limit the occurrence of such mergers and acquisitions. For example, anti-trust law is the one to limit horizontal merger and acquisition.
B. Vertical mergers and acquisitions
It happens between enterprises which are purchasers and sellers to each other in the continuous phases of production and sale. That is merger and acquisition between enterprises whose production and business are relations of upstream and downstream. It divides to forward and backward merger & acquisition(M&A). Forward M&A is targeting on end-users, e.g.A textile company mergers with a dyeing and printing company which uses its products. Backward M&A is targeting on raw material suppliers, e.g. A iron company mergers with a iron ore company. Its purpose is to control the whole process of production and sales in certain industry and sector, thus to speed up production process, shorten production circle, reduce trade cost and acquire integrated comprehensive benefits.
C. Conglomerate mergers and acquisitions
It is none of either competitor or enterprises of customers or suppliers in reality or potentiality. It also divides into three forms: products dilated M&A, which is enterprises M&A with correlative products;market expanding M&A, which an enterprise mergers and acquires that manufacture similar products in the areas of no infiltration in order to expand market; pure conglomerate M&A, which happens in the enterprises that produce or trade products or services with no link or relation.