The merger was officially completed, including the consolidation of the different Loyalty programs into 1, by during the second half of 2018. The two amalgamated entities are better positioned to realize more revenue than they would have when operating independently. The Celler-Kefauver Act strengthened powers granted by the Clayton Act to prevent mergers that could possibly result in reduced competition. ”Marriott International Announces Vision For Sheraton Transformation.” Accessed Sept. 8, 2020. Horizontal integration is the acquisition of a business operating at the same level of the value chain in the same industry. On the other end of the spectrum, conglomerate diversification is for companies that strive for growth. The merger went through an exhaustive review by the FTC to check for the formation of a Monopoly in the petroleum industry. The biggest challenge that this deal faced was the merging of the Loyalty programs of the 2 chains because of the different benefits provided by each program. If one company ends up with a dominant market share, it has a monopoly. The deal was an all-stock transaction, with Chase formally acquiring JP Morgan, exchanging 3.7 shares for each of JP Morgan’s shares. The are several aspects that characterize horizontal integration. The other two forces, the power of suppliers and customers, drive vertical integration. The first and most troublesome is the level of scrutiny this kind of strategy faces, especially from government agencies. However, when horizontal mergers succeed, it is often at the expense of consumers, especially if they reduce competition. Marriott and Starwood were two renowned hotel chains all across the globe. Horizontal Integrations are a common practice in Corporate Finance. It means that a vertically integrated company will bring in previously, Operations management is a field of business concerned with the administration of business practices to maximize efficiency within the organization. Here are a few other advantages of horizontal integration: Horizontal integration should not be confused with lateral integration, which is the merger of two companies that sell related goods but do not compete with each other. Definition. In this way, Coca-Cola was able to cover other fronts by taking over the manufacture of substitute products such as energy drinks in the first instance as occurred with the launch of Powerade and juices. The Walt Disney Company. These laws prevent big corporations from mergers and acquisitions that would narrow the competitive market and possibly create a monopoly. Thorburn, David and Jenkins, Henry (eds)(2003) Rethinking Media Change, MIT Press, Cambridge, Massachusetts, pp.284. They include: Horizontal integration can be distinguished from conglomerate integration by taking into account the direction. How to cite this article: certification program, designed to help anyone become a world-class financial analyst. Within 15 days of the announcement of the merger, Exxon stock price recorded a 3.3% gain jumping from $71.63 to $74. Utilizing these kind of opportunities can come with great benefits. Each company has stores that sell garments designed to meet the needs of different groups. If analyzed and executed properly, it can lead to increased market share, increased efficiency, reduction in costs, and economies of scale. For this reason, the strategy is subject to antitrust laws, not to mention the scrutiny of regulatory bodies. Forward integration is a business strategy that involves expanding a company's activities to include control of the direct distribution of its products. By increasing its customer base, the new company can now boost its revenue. In today’s business landscape, companies across level and within the same industry merge to increase the production of goods and services. U.S. Securities and Exchange Commission. An example of horizontal integration in the food industry was the Heinz and Kraft Foods merger. This was one of the main Mexican juice companies, with the objective of expanding its beverage portfolio mainly in Latin America. Procter & Gamble’s 2005 acquisition of Gillette is a good example of a horizontal merger which realized economies of scope. Because both companies produced hundreds of hygiene-related products from razors to toothpaste, the merger reduced the marketing and product development costs per product. Post-merger, the resulting firm was producing 10% of the world’s total steel. Such horizontal mergers or acquisitions reduce competition from new potential rivals or from already established rivals that wish to acquire the company. Mittal started the bid for a merger by offering cash to Arcelor Shareholders. Big mergers like these are the reason why antitrust laws are in place. Marriott International. Horizontal mergers of related companies occur within the same industry or line of products so that the entities involved can exploit their competencies. They make the decision to merge or acquire other similar companies. By using Investopedia, you accept our, Investopedia requires writers to use primary sources to support their work. The need to acquire a new customer segment can also be a reason for horizontal integration.