Horizontal Mergers

 Horizontal mergers occur when two companies sell similar products to the same markets. A merger
between Coca-Cola and the Pepsi beverage division, for example, would be horizontal in nature. The goal
of a horizontal merger is to create a new, larger organization with more market share. Because the
merging companies' business operations may be very similar, there may be opportunities to join certain
operations, such as manufacturing, and reduce costs.

Vertical Mergers
 A vertical merger joins two companies that may not compete with each other, but exist in the same
supply chain. An automobile company joining with a parts supplier would be an example of a vertical
merger. Such a deal would allow the automobile division to obtain better pricing on parts and have better
control over the manufacturing process. The parts division, in turn, would be guaranteed a steady stream
of business.

Market Extension Mergers

 The main benefit of a market extension merger is to help two organizations that may provide similar
products and services grow into markets where they are currently weak. Rather than try to establish a
retail presence in Europe, Wal-Mart could merge with a European retailer that is already successful and
has good brand recognition. Even though the two organizations are both big-box retailers selling similar
products, they have found success in different parts of the world. As a single organization, they have a
diverse, global presence.

Product Extension Mergers

 Two companies may merge when they sell products into different niches of the same markets. A
manufacturer of high-end stoves may merge with a company that makes budget-conscious models. The
combined organization now has a complete product line that spans various price points.

Conglomerate Mergers
 Conglomerate mergers occur when two organizations sell products in completely different markets.
There may be little or no synergy between their product lines or areas of business. The benefit of a
conglomerate merger is that the new, parent organization gains diversity in its business portfolio. A shoe
company may join with a water filter manufacturer in accordance with a theory that business would rarely
be down in both markets at the same time. Many holding companies are built upon this theory.