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ACCA Strategic Professional · Advanced Financial Management · Acquisitions and mergers versus other growth strategies

Two companies in the same industry agree to combine, and the combined entity will operate at the same stage of the supply chain, selling the same product lines. How is this merger classified?

This is a horizontal merger, because the two firms operate at the same stage of the supply chain in the same industry. Vertical mergers join different supply chain stages, while conglomerate mergers combine unrelated businesses, so neither describes this combination.

  1. AHorizontal mergerCorrect
  2. BVertical merger
  3. CConglomerate merger
  4. DConcentric merger with unrelated products

Explanation

A merger between firms at the same stage of production in the same industry is horizontal. A vertical merger links different stages of the supply chain, and a conglomerate merger combines unrelated businesses. The main motive here is typically economies of scale and increased market share.

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