when two companies merge two separate entities create a new joint organization the brand of one of those two companies is usually retained though the composition of operations and personnel is shared between both of the former individual companies in addition the product line of both companies is often similar and equally competitive in the market 
in a merger both companies are striving to become a larger presence in their existing market most mergers are of similar firms where integration of the two companies may be seamless due to the similarities between what the two former companies used to do similar to a merger an acquisition occurs when one company outright takes over the operations of another company though the two companies technically join together one company remains in control the acquiring company s staff executives and operations often remain in place while the acquired company s resources are integrated as management sees fit companies often pursue acquisitions in an attempt to get something specific for example microsoft specifically wanted to enhance its presence in the video game market therefore it acquired activision blizzard in january 2022 this example of an acquisition shows an often deliberate strategy for a specific sector in which a company wants to achieve a very specific goal companies can also embark on horizontal integration by making more conscious allocations of internal capital through internal expansion a company simply chooses to strategically change course and apply more resources in a different way for example a restaurant can expand to offer catering companies or a beverage manufacturer may branch off to make food products in these examples a company continues to operate how it use to however instead of committing capital to acquire an external company or transition with a merging firm it decides to deploy those resources in house to train staff buy equipment make capital investments and grow a new branch of operations on its own the m a market was as hot as ever in 2021 according to mckinsey the total value of larger deals valued greater than 25 million for the year peaked at 5 9 trillion up 37 from 2020 advantages and disadvantages of horizontal integrationcompanies engage in horizontal integration to benefit from synergies there may be economies of scale or cost synergies in marketing research and development r d production and distribution or there may be economies of scale which make the simultaneous manufacturing of different products more cost effective than manufacturing them on their own 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 synergies can also be realized by combining products or markets horizontal integration is often driven by marketing imperatives diversifying product offerings may provide cross selling opportunities and increase each business market a retail business that sells clothes may decide to also offer accessories or it might merge with a similar business in another country to gain a foothold there and avoid having to build a distribution network from scratch like any merger horizontal integration does not always yield the synergies and added value that was expected it can even result in negative synergies which reduce the overall value of the business if the larger firm becomes too unwieldy and inflexible to manage or if the merged firms experience problems caused by vastly different leadership styles and company cultures there are regulatory issues as well if horizontal mergers within the same industry concentrate market share among a small number of companies it creates an oligopoly if one company ends up with a dominant market share it has a monopoly if a merger threatens competitors or seems to drastically restrict the market and reduce consumer choices it could attract the attention of the federal trade commission may result in efficiencies economies of scale or synergies not otherwise possiblemay reduce company risk through product and market diversificationmay increase profitability through new cross selling opportunitiesmay result in decreased costs due to better processes and greater expertisemay reduce value or synergy if merger is not performed successfullymay expose inflexibilities that won t be resolved by the mergermay result in a clash of management styles with multiple leadership teams coming togethermay result in regulatory issues if a dominant market share is formedhorizontal integration vs vertical integrationboth horizontal integration and vertical integration are the practice of a company expanding its current operations however each process aims to have a different strategic outcome horizontal integration occurs when a company aims to remain within its current part of the supply chain the company often wants to enhance its existing product or get a larger share of the market vertical integration is the strategy of expanding across the supply to get better at processes the company is currently not involved in for example a manufacturer may acquire a raw materials distributor to have better control over the quantity pricing or timing of when it gets raw goods the company is expanding from its current position in the manufacturing process and performing a backward vertical integration vertical integration is often undertaken to have better control over a long process while horizontal integration is more suitable for a company wanting to become more niche for something specific horizontal integration often entails similar companies coming together while vertical integration often entails different companies related to a similar product coming together the ultimate goal of vertical integration is to become independent of suppliers and control more aspects of the supply chain on the other hand horizontal integration strives to eliminate competitors grow in market size and create economies of scale examples of horizontal integrationmany mergers that hit news headlines are examples of horizontal integration if a company acquires or merges with another company and both firms are in a very similar industry it is most likely an example of horizontal integration specific examples include 