If the all-star fuel filling company, a chain of gasoline stations, acquires the mid-states refining company, a refiner of oil products, this would be an example of a vertical acquisition.
What is vertical acquisition?
- A vertical acquisition occurs when one company buys another that is a member of the same industry but operates at a different level of production.
- A vertical acquisition's goal differs greatly from a horizontal acquisition's goal.
- A vertical acquisition's main goal is to ensure the supply of vital items, prevent supply disruption, and limit supply to rival companies, in contrast to a horizontal acquisition, which seeks to lower costs and enhance profit.
- You will have better control over the entire production and distribution process if you make a vertical acquisition. By doing so, you will be able to increase your profit by cutting out middlemen.
If you want to concentrate on improving your present product line, a vertical acquisition is considerably more suitable. You can take control over an entire industry rather than just a market by buying a business that is on the same manufacturing path but at a different stage.
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