What is the difference between, horizontal, vertical, and diverse integrations?
A Horizontal Integration
The acquisition of a business operating at level of the value chain in the same industry.
- Similar size, services, and geography/market
- Different type or service
- Example: Disney-Pixar
- Pixar operated in the same animation space as Disney, but its (digitally) animated movies used cutting-edge technology and an innovative vision. The deal expanded its market share, and boosted its profits.
A Vertical Integration
A vertical merger or vertical integration is a merger between two companies that produce different products or services along the supply chain toward the production of some final product. Vertical mergers are usually conducted to increase efficiency along the supply chain which, in turn, increases profits for the acquiring company.
- Different points in the delivery system
Example: Multi-chain automotive dealer (General Motors) acquiring a body shop or a detailing center.
A Diverse Integration
Merger between different organizations in unrelated industries.
- None or minimal synergies
- Different points in the economic cycle
- Uses the basic concept of diversification of assets or investments
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