Question

Nova Airlines' purchase of Emu Airlines combines the resources and capabilities of both firms to create the world's largest airline. The newly formed company is an example of a ___________.

a) Joint Venture
b) Horizontal Merger
c) Conglomerate Merger
d) Strategic Alliance

Answer 1

b) Horizontal Merger

The scenario described, where Nova Airlines' purchase of Emu Airlines combines the resources and capabilities of both firms to create the world's largest airline, is an example of a Horizontal Merger. This type of merger occurs when two companies operating in the same or similar industry and producing similar goods or services combine their operations.

Answer 2

A horizontal merger occurs when two companies in the same industry and at the same stage of production merge; thus, the acquisition of Emu Airlines by Nova Airlines to form the largest airline is an example of a horizontal merger.

Step-by-step explanation:

Nova Airlines' purchase of Emu Airlines and the combination of their resources and capabilities to create the world's largest airline would be classified as a b) Horizontal Merger. In the context of corporate mergers, a horizontal merger takes place when two firms in the same industry and at the same stage of production combine their operations. This contrasts with a joint venture, where two or more firms would come together to undertake a particular project while remaining separate entities, a conglomerate merger, where the companies are from unrelated industries, and a strategic alliance, involving a partnership between firms to pursue a set of agreed-upon objectives while remaining independent organizations. Concerns often arise with horizontal mergers, as they may reduce competition and lead to market dominance, which is subject to scrutiny under antitrust laws.