The horizontal merger is the integration of two or more companies in the same sector that produce services and goods of the same type under the same personality or management.
The mergers in the business world are common when two or more decide industries to end the competition and integrate their organizational structures into one, either by total horizontal integration (pure fusion), by creating a new brand that combines both, or through a cold integration, through which a single company and legal personality, a single address and the same objectives are constituted, but each company retains its name and part of the company culture it owns.
Horizontal mergers can occur for multiple reasons, although the main ones are usually the following:
- Increase the products exposed to the market or constitute new lines of these: with this it is possible to give a greater offer to the market or more differentiated.
- Expand geographically: so that among the sum of all the original companies can enter new markets that until then, by operation, could not.
- Reduce competition: in sectors where competition is lower, mergers can be carried out without compromising profitability and strength, quite the opposite, since in this way large companies are created that have greater decision power in the markets About the customer
- Reduce costs and achieve economies of scale, that is, obtain greater competitiveness and profitability.
Horizontal fusion and consumers
Competition agencies often pay close attention to these procedures so as not to reduce competition in an industry and not reduce consumer rights against a company that acquires more power. That is why on many occasions, depending on the impact on the sector that the merger may have, it is not allowed that two or more companies that until now were competitors, become uniform, or can afford but are forced to get rid of services, sectors or companies associated, in order not to deteriorate the welfare of consumption or establish monopolies .