Economies of vertical integration are one possible source of synergy in mergers.

Question

Quizplus · Accepted Answer

Economies of vertical integration refer to the cost savings and efficiencies that can result from combining two companies that operate in different stages of a supply chain. For example, if a company that produces raw materials merges with a company that manufactures finished products, the resulting entity may be able to reduce costs by streamlining the supply chain and eliminating intermediaries. This is an example of a synergy that can be achieved through vertical integration.

Economies of Vertical Integration Are One Possible Source of Synergy