Types of Merger:

There are three types of merger

a) Horizontal merger: This is the union of two or more firms in the same industry and at the same stage of production. For example, two motor car manufacturers could merge to produce one or variety of brands within the same company.

b) Vertical merger: This refers to a merger of firms in the same industry but at different stages of production of a good e.g. a car manufacturer with a car tyre manufacturer. The two firms thus become one and the tyre produced is used directly to achieve the output of a complete car.

c) Conglomerate merger: This occurs where firms in different industries merge.

For example, a furniture making company might merge with a soap manufacturer to reverse declining demand trend. Once the merger has taken place,  the  organisation  so  formed  can  reorganize  to  reduce  costs.  For example, only one head office will now be needed, a process known as rationalization.