Rajat is manufacturing sweets, later he merged his business with a dairy farm so that it would become cheaper to obtain milk for manufacturing sweets. Identify the type of merger.
Answer & explanation
Correct answer: option 3
The correct answer is option (3) - Vertical Merger
A vertical merger occurs when two companies in the same supply chain, but at different stages of production or distribution, merge. In this case, the merger is between a sweets manufacturing business and a dairy farm, which are at different stages in the supply chain for the sweets production.
- Conglomerate Merger: This involves combining businesses in unrelated industries, which doesn't apply to Rajat's situation.
- Horizontal Merger: This occurs between businesses in the same industry, typically to gain market share or economies of scale. While both are involved in food production, the dairy farm doesn't compete directly with Rajat's sweets business.
- Product Extension: This refers to a company expanding its product line within its existing market, which isn't applicable here as the merger focuses on upstream inputs rather than product diversification.