Vertical merger
M&A / Merger ModelA combination of companies at different stages of the same supply chain, such as a manufacturer buying its supplier.
A vertical merger moves up or down the chain: a car maker buying a parts supplier, a retailer buying a logistics business, a streaming service buying a studio. The buyer is acquiring an input or a route to market rather than a competitor.
The rationale is control and margin capture: securing supply, removing a counterparty's markup, coordinating what were two separate planning processes, and sometimes denying that input to rivals.
Synergies are real but usually smaller and slower than in a horizontal deal, because there is far less duplication to remove. The two businesses do genuinely different things.
Regulators look at it differently too. The concern is foreclosure, whether the combined firm can starve competitors of an input or a channel, rather than simple concentration, and that is generally a harder case to prove.
Worked example
A car manufacturer buys a supplier that provides 40% of its wiring harnesses at a 12% margin.
The margin the supplier used to earn on that volume is captured internally, and supply is secured. But the two businesses barely overlap, so there is little duplication to remove and synergies are smaller and slower than in a horizontal deal.
The regulatory question is foreclosure, whether rival carmakers can still buy from that supplier, rather than concentration.