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It’s typical for companies that undergo a horizontal integration to see more revenue than when they were individual entities. Horizontal integration represents a robust business growth strategy for firms aiming to consolidate market power and broaden their operational scope within their industry. The following examples illustrate how significant companies have leveraged this strategy to expand their market presence, diversify their offerings, and achieve significant operational synergies. Eliminating direct competitors through horizontal integration significantly reduces market competition.

Already the largest drugstore chain in the country, the extra stores acquired in the deal gave CVS control over 6,000 drug stores across 42 states and the District of Columbia. Shortly after that, the combined bank—with assets valued at over $500 billion—changed its name to Bank of America. Still, notably, the company’s share price (using BankAmerica’s share price in 1998 as a reference) is remarkably close to where it was all those years ago. An acquisition occurs when a company buys another firm and folds its operations into its own. From the 1970s onwards, Santander’s acquisition of multiple regional and national banks helped the company become a global retail banking giant.

Investors launched lawsuits over whether the whole deal really was the ‘merger of equals’ that the directors had claimed. In 2007, Daimler agreed to sell the Chrysler unit to Cerberus Capital Management for $6 billion. The company may set up new mines, manufacturing plants, distribution centers, or retail outlets on its own. The trend these days, however, is to achieve this by buying or fusing with other companies. This can be done by either merging with or acquiring another company that produces or offers the same services.

Additional Benefits

The company is expanding from its current position in the manufacturing process and performing a backward vertical integration. Like any merger, horizontal integration does not always yield the synergies and added value that was expected. An example of horizontal integration in the food industry was the Heinz and Kraft Foods merger. On 25 March 2015, Heinz and Kraft merged into one company, the deal valued at $46 billion.3132 Both produce processed food for the consumer market. Facebook sought to strengthen its position in the social sharing space and saw the acquisition of Instagram as an opportunity to grow its market share, reduce competition, and gain access to new audiences. Instagram is owned by Meta but still operates independently as its own social media platform.

Horizontal integration can be defined as expanding a business at the same level of the supply chain in the same industry. DealRoom provides an end-to-end solution to support every aspect of horizontal and vertical integrations, ensuring you can navigate the complexities of M&A confidently and precisely. Transform your company and find out how to add value to your transaction by scheduling a free demo today. Vertical integration occurs when a company acquires a company outside of their current position along the supply chain. For example, a manufacturer may acquire a retail company so that the manufacturer can not only control the process of making the good but also selling the good as well.

The purpose of horizontal integration (HI) is to grow the company in size, increase product differentiation, achieve economies of scale, reduce competition or access new markets. When many firms pursue this strategy in the same industry, it leads to industry consolidation (oligopoly or even monopoly). A different type of merger is vertical integration, which is when companies merge that are in different positions in the value chain. For example, a car manufacturer could buy a producer of car tires, in order to secure this input to its production line. The key difference between the horizontal and vertical integration concepts is that horizontal integration occurs among similar businesses, while vertical integration occurs between suppliers and customers. Horizontal integration occurs when two businesses merge that produce goods or services at the same level in the value chain.

It isn’t always easy to maintain a corporation after this sort of structural change, but a properly planned strategy may prove successful. Following are several horizontal integration examples today and the companies that have made the process work for them. A horizontal monopoly is legal as long as the company doesn’t become too big or the only competitor. It’s basically when a company strategizes so much that they’re the ones who benefit the most from it.

What distinguishes horizontal integration from vertical integration?

By merging or acquiring rivals within the same industry, businesses can expand their reach and unlock a range of potential benefits. This strategy can reshape entire industries, impacting everything from product offerings to market competition. We’ll delve deeper into the mechanisms of horizontal integration, examining the different methods companies use to achieve it and the potential advantages and drawbacks for investors. Selecting horizontal and vertical integration depends on the company’s current market position and long-term growth strategies. Horizontal integration benefits companies aiming to consolidate market power within their industry, as seen with significant mergers and acquisitions in the entertainment and tech sectors. Companies looking to grow in size, increase revenue, expand to new product lines, and diversify operations may consider pursuing horizontal integration.

1. Wood Color will also have the advantage of a huge customer base and access to the market for office furniture.
2. The company’s most significant acquisitions have invariably been in warehouses and distribution centers, ensuring it has the footprint to deal with the expanding e-commerce market.
3. Vertical integration, on the other hand, takes place between two companies in the same industry but at different points in production.
4. Government agencies often put antitrust laws in place to prevent this from happening.
5. It often leads to enhanced efficiency and the ability to offer competitive pricing.

Horizontal Integration: Definition, Examples and Strategy

The process is also known as lateral integration and is the opposite of vertical integration whereby companies that are at different stages in the production supply chain merge. HI is different from vertical integration, where a firm usually expands into another production stage rather than merging or acquiring the company in the same production stage. For example, a company is vertically integrating if it expands from manufacturing industry to retailing industry, while HI would mean buying other firms in the same manufacturing industry. If there are several horizontal integration mergers within the same industry that concentrate market share with a small number of companies, this is considered an oligopoly. If the resulting market share is largely held by one entity, this is considered a monopoly. In either case, the acquirer may be investigated under anti-trust laws, and a proposed acquisition may be rejected by the government.

The acquisition allowed Facebook to reach new demographics and enhance its advertising revenue streams. The integrated company benefitted from a combined user base and offered more control over the social media landscape. Mergers of companies with complementary or overlapping product lines result in entities offering broader ranges of goods or services to customers.

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The integration combined the first and second largest energy corporations in the United States. Horizontal integration is the examples of horizontal integration process of acquiring or merging with competitors, leading to industry consolidation. In addition to this content, she has written business-related articles for sites like Sweet Frivolity, Alliance Worldwide Investigative Group, Bloom Co and Spent.

After the merger, LN Mittal was named as the president of Arcelor-Mittal and became the majority stakeholder in the company. The merger created a massive global manufacturer that is responsible for around 10 percent of the world’s steel production. Horizontal integration is similar to this in that a company (that would be you in this example), wants to seek out different deals. Remember, it’s because they’re all selling similar products, (this would be you seeking out different restaurants because you want all your favorites within reach). You also want to make sure that it’s in an area where there are a lot of your favorite fast food restaurants.

Understanding Horizontal Acquisitions

Procter & Gamble’s 2005 acquisition of Gillette is a good example of a horizontal merger that realized economies of scope. Because both companies produced hundreds of hygiene-related products from razors to toothpaste, the merger reduced the marketing and product development costs per product. The examples show that, in many cases, horizontal integration pays off as those involved can widen their reach and eliminate weaker competitors. Companies can gain institutional knowledge, expertise, and strengths that they may lack from another firm. Ultimately, integrating firms reduce their costs while increasing revenues. This merger proved extremely beneficial to both companies, even without merging the “houses” that produced the animation.

Both companies operated in the same industry (social media) and shared similar production stages in their photo-sharing services. It is a type of integration strategies pursued by a company in order to strengthen its position in the industry. A corporate that implements this type of strategy usually mergers or acquires another company that is in the same production stage.

Mergers and acquisitions are two types of business transactions that involve the consolidation of two or more companies. A merger combines two companies together—usually those of similar size and operations. This type of transaction is usually friendly, where all parties involved agree to the consolidation. An acquisition, on the other hand, occurs when one company purchases another.

That’s because the new, larger company may not be able to react or adapt to market swings, consumer tastes, and economic conditions as quickly as a smaller company would. With these complementary activities the company pursues a common objective e.g. a greater market share. Vertical Integration is the opposite from Horizontal Integration, and it models the style of ownership and control. The acquisition did not involve a merge of names, but did involve Walt Disney Studios as a subsidiary and The Walt Disney Company as owner. Pixar wanted Disney to only distribute the films and completely cede production control and marketing rights to the films.

The main difference between horizontal and vertical integration lies in examples of horizontal integration the type of companies being acquired or merged. Horizontal integration involves companies at the same level of the value chain within the same industry — essentially, competitors. In contrast, vertical integration involves acquiring or merging with companies at different levels of the value chain, such as suppliers or distributors. Horizontal integration occurs when two companies in the same industry at the same stage in the production process merge into a single entity. It allows companies to gain market share and market power, eliminate their competition, acquire new products and services, a larger customer base, and increase their revenue.

Bigger Base of Customers

Pixar’s innovation, when combined with Disney’s formulaic storytelling method and top-notch character marketing, led to both increased market shares and spikes in profits. A larger, more recognizable brand can attract a wider customer base and potentially command higher prices. Consider two popular ride-hailing apps merging—the combined entity would become a dominant player in the market, with greater brand recognition for consumers. Once a horizontal acquisition is complete, the target firm’s identity is usually dissolved and it becomes part of the acquirer. Shares of the target firm are dissolved if it is public and its shareholders may receive cash or stock in the acquiring company. These advantages of Horizontal Integration can lead to the growth of partnerships in R&D, production, offering of products and services and more.

1. Companies undergoing horizontal integration may face several challenges, including cultural integration, where merging companies must blend differing corporate cultures, management styles, and operating procedures.
2. In a merger, both companies are striving to become a larger presence in their existing market.
3. Selecting horizontal and vertical integration depends on the company’s current market position and long-term growth strategies.

Horizontal Integration Examples: 5 Companies That Made It Work

Understanding horizontal integration is essential for any business looking to bolster its market presence or enhance its service offerings. The dynamics of many industries mean that the market can only support three to four large companies. As a result, horizontal integrations become a popular means of acquiring market share.

Regulatory Scrutiny

The company’s most significant acquisitions have invariably been in warehouses and distribution centers, ensuring it has the footprint to deal with the expanding e-commerce market. Bank of America was born in this wave of mergers and acquisitions when Nations Bank horizontally merged with Bank of America in 1998 in a $62 billion deal. This business strategy doesn’t involve M&A but rather new product developments or investment in existing activities, such as geographic expansion.

It wants to make more money and invest the money that they’re making for the company to grow bigger. As it relates to macroeconomics and different areas of management that’s why we give you the example of Blockbuster and Netflix. In 1998, German carmaker Daimler-Benz AG merged with Chrysler Corporation, the smallest of the three US automakers – Daimler bought 92% of Chrysler to form DaimlerChrysler AG. It was called the ‘Merger of Equals’, but has gone down in business history as a disaster.

Once the shares transferred over, the company agreed to change its name to United Continental Holdings. What ended up happening was that Wal-Mart began to make money on all of the sales that would come in for that particular region. They began making money in and around different regions because of all of the strategies they set up ahead of time. To better understand the differentiation of these two business strategies, read below the practical example of two organizations that make transformation decisions for the company. In 2012, Facebook bought Instagram for $1 billion in cash and stock with the intention to keep Instagram management independent.