Answer:
e
Step-by-step explanation:
A merger can be described as the absorption of one firm by another firm.
When a merger occurs, one of the firms would not exist as a separate entity while the other firm would continue to exist.
Types of merger
1. Horizontal merger : this is a type of merger that occurs between firms in the same industry. The firms are usually competitors.
Reasons for an horizontal merger
- It is done to increase the market power of a firm
- This type of merger is done to achieve economies of scale.
An example of an horizontal merger is the merger between Mobil and Exxon in 1999.
2. Vertical merger : this is when a firm purchases another firm in the same production line. e.g. a baker purchases a pastry distributing company
Reasons for a vertical merger
- Cost savings
- It provides the firm acquiring a greater control of the production process.
Types of vertical merger
a. Backward integration : it is when the acquiring firm purchases a firm ahead of it in the production process. e.g. a baker purchases a pastry distributing company
b. Forward integration : it is when the acquiring firm purchases a firm that is behind it in the production process. e.g. a baker purchases a firm that supplies grains
3. Conglomerate merger : This occurs when the products of the merging firms were not related in any manner before the merger.