Explain the significance of these terms in merger analysis with regard to (a) the likelihood of governmental intervention

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Explain the significance of these terms in merger analysis with regard to (a) the likelihood of governmental intervention

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Four economic classifications of mergers are (1) horizontal, (2) vertical, (3) conglomerate, and (4) congeneric. Explain the significance of these terms in merger analysis with regard to
(a) the likelihood of governmental intervention

Four economic classifications of mergers are (1) horizontal, (2) vertical, (3) conglomerate, and (4) congeneric. Explain the significance of these terms in merger analysis with regard to
(b) possibilities for operating synergy.

Explanation & AnswerSolution by a verified expert

Explanation

The government generally intervenes to protect industry competition arising from merger. The horizontal and vertical mergers lead to increased market share and decrease competition. This may lead to monopolies or oligopolies and hence affect the overall industry and price of the product. So the government needs to intervene in these mergers to protect the industry participants. But congeneric and conglomerate mergers lead to diversification and do not increase the same industry's market share. Hence the government intervention is less in this type of merger.

Verified Answer

The horizontal and vertical mergers are more prone to government intervention. The government intervention is less in the congeneric and conglomerate merger.

Explanation

The horizontal and vertical mergers are most likely to result in operating synergies. In these types of mergers, both companies are either in the same or similar lines of business. This leads to economies of scale in management, production, and marketing. However,  the congeneric and conglomerate mergers are less likely to result in operating synergies.This is because the companies are not in similar business lines, which does not result in economies of scale.

Verified Answer

The horizontal and vertical mergers are most likely to result in operating synergies. However,  the congeneric and conglomerate mergers are less likely to result in operating synergies.

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