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

Sundaram Tyres Ltd acquires Kaveri Rubber Ltd, its own supplier of raw rubber, to secure input supply and cut procurement costs. How is this combination best classified?

The combination is a vertical merger, because the acquirer and the target operate at different stages of the same value chain: a tyre maker buying its rubber supplier. Horizontal mergers involve direct competitors, and conglomerate mergers involve unrelated businesses.

  1. AHorizontal merger
  2. BVertical mergerCorrect
  3. CConglomerate merger
  4. DConcentric merger with no value-chain link

Explanation

A merger between firms at different stages of the same production or distribution chain, such as a manufacturer and its raw material supplier, is a vertical merger. A horizontal merger would need both firms to compete in the same line of business. A conglomerate merger involves unrelated businesses.

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