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CS Professional · Corporate Restructuring, Valuation and Insolvency · Types of Corporate Restructuring

Dev Retail Ltd, a manufacturer of packaged foods, merges with Nila Farms Ltd, which grows the raw agricultural produce that Dev buys as its main input. How is this combination classified?

This is a vertical merger. Dev, the food manufacturer, combines with its raw material supplier Nila Farms, so the two operate at different stages of the same supply chain. They are not competitors, so it is not horizontal, and their businesses are related, so it is not a conglomerate merger.

  1. AVertical mergerCorrect
  2. BHorizontal merger
  3. CConglomerate merger
  4. DConcentric merger with a competitor

Explanation

Companies at different stages of the same production or supply chain, such as a processor and its raw material supplier, combine in a vertical merger. A horizontal merger is between competitors in the same line of business. A conglomerate merger involves unrelated businesses, which is not so here.

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