Horizontal Merger

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What is a 'Horizontal Merger'



 A horizontal merger is a merger or business consolidation that occurs between firms that operate in the same industry. Competition tends to be higher among companies operating in the same space, meaning synergies and potential gains in market share are much greater for merging firms. This type of merger occurs frequently because of larger companies attempting to create more efficient economies of scale.

A horizontal merger of two companies already excelling in the industry may be a better investment than putting a lot of time and resources into developing the products or services separately. A horizontal merger can increase a company’s revenue by offering an additional range of products to existing customers. The business may be able to sell to different geographical territories if one of the pre-merger companies has distribution facilities or customers in areas not covered by the other company. A horizontal merger also helps reduce the threat of competition in the marketplace. In addition, the newly created company may have greater resources and market share than its competitors, letting the business exercise greater control over pricing.

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