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

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.