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CA Final · Advanced Financial Management · Mergers, Acquisitions and Corporate Restructuring

Bharat Cement Ltd acquires Sundaram Limestone Ltd, which supplies 70% of its limestone requirement. Both operate in the same production chain, with Sundaram at the earlier stage. How is this merger classified?

It is a vertical merger, specifically backward integration, because the acquirer buys its own supplier from an earlier stage of the same production chain. A horizontal merger involves competitors, and a conglomerate involves unrelated businesses, so neither describes this deal.

  1. AHorizontal merger
  2. BVertical merger (backward integration)Correct
  3. CConglomerate merger
  4. DReverse merger

Explanation

The target is a supplier at an earlier stage of the same production chain, so the acquirer integrates backward. This is a vertical merger. A horizontal merger would need both firms to be competitors in the same line of business at the same stage.

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