What is a horizontal acquisition?
Horizontal acquisition occurs when one business buys another in the same industry and production stage. Due to market share or scalability, the new company may be more competitive than the solo firms.
A horizontal purchase allows a corporation to increase product output without pivoting. A horizontal acquisition increases the capacity of the acquirer while maintaining core business activities, unlike a merger that creates a new firm.
Knowing Horizontal Acquisitions
Horizontal acquisition organizations create the same items or services at the same production stage. This allows the new firm to enhance production capacity and market share. If the firms were in separate manufacturing phases, the equipment may not overlap and be as helpful to the buyer.
If the corporate cultures are pretty diverse, horizontal acquisitions of like-minded companies might be complex. Some purchases focus on equipment or operations control later in the manufacturing cycle.
A horizontal acquisition expands a company’s client base.
A vertical acquisition involves two firms in the same industry, such as food or energy, but at distinct production phases. This lets the purchasing business buy equipment upstream or downstream from the final client. This gives the buyer more manufacturing control.
Horizontal integrations help the buying firm minimize competition, diversify product offerings, create new goods, grow, and enter new markets.
Example
An energy producer buys a competing energy producer. This horizontal purchase is in the same industry and manufacturing schedule.
The energy producer then buys a city power grid management firm. This is advanced vertical integration since the energy provider bought a firm that brings its product to consumers.
Conclusion
- Acquisitions occur when one firm acquires another in the same industry.
- Primary business processes frequently grow when a firm buys a similar company.
- A horizontal purchase usually involves two firms with comparable production schedules and products.
- A candy firm buying another candy company with different goods but a similar manufacturing schedule is a horizontal acquisition.
- A virtual acquisition is distinct from a horizontal purchase since the firms are in the same industry but have separate production cycles.
