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Simple English definitions for legal terms
horizontal merger
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A quick definition of horizontal merger:
A horizontal merger is when two or more companies that make similar products and are in the same area join together to become one big company. This can happen when they want to be stronger and compete better with other companies. It's like when two kids who both like playing with Legos decide to build something together instead of separately.A more thorough explanation:
A horizontal merger is when two or more businesses that are direct competitors and operate in the same market level combine to form a single entity. This type of merger is also known as horizontal integration.
For example, if two car manufacturers merge, it would be a horizontal merger because they both produce similar products and operate in the same geographic region. Another example is if two grocery store chains merge, it would be a horizontal merger because they both sell similar products and operate in the same market level.
The purpose of a horizontal merger is to increase market share, reduce competition, and gain economies of scale. By merging, the new entity can benefit from increased bargaining power with suppliers and distributors, as well as cost savings from shared resources and operations.