What is the objective of forming a vertical merger?
A) increasing size and market power within industry
B) providing tighter integration of production and increased control over supply of crucial inputs
C) reducing risk by making the firm less vulnerable to adverse conditions in any single market
D) transferring total or partial ownership of assets to investors

Question

Quizplus · Accepted Answer

The main objective of forming a vertical merger is to provide tighter integration of production and increased control over the supply of crucial inputs. In a vertical merger, two companies that are at different levels of the supply chain come together, with the aim of gaining greater control over the supply chain and reducing their dependence on third-party suppliers. This can result in lower costs, better quality control, and improved efficiency. Thus, option B is the correct answer.

Option A is incorrect because increasing size and market power is not the only objective of a vertical merger. Option C is incorrect because while it may be a potential benefit of a vertical merger, it is not the primary objective. Option D is incorrect because transferring ownership of assets is not the primary objective of a vertical merger.

What Is the Objective of Forming a Vertical Merger