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Chapter 1 BUSINESS COMBINATIONS Chapter Outline A BUSINESS COMBINATION IS THE UNION OF PREVIOUSLY SEPARATE BUSINESS ENTITIES. A Horizontal integration is the combination of firms in the same business lines and markets. B Vertical integration is the combination of firms in the same business, but with operations in different, successive, stages of production and/or distribution. C Conglomeration is the combination of firms with unrelated and diverse products and/or service functions. D Reasons companies chose to expand through combination rather than by building new facilities include 1 May be less expensive to acquire rather than build facilities or develop R&D 2 May be less risky to acquire product lines or markets rather than develop new products, particularly if the goal is to diversify 3 Operating delays are lessened since the facilities are in place, thereby shortening the time to market 4 A small company’s growth may lessen its chances of being the target of a takeover 5 Acquisition of intangible assets, tax advantages, and various other reasons 6 Just being “big†ANTITRUST LAWS PROHIBIT BUSINESS COMBINATIONS THAT WOULD BE IN RESTRAINT OF TRADE OR WOULD IMPAIR COMPETITION. A Proposed business combinations are reviewed by federal agenc
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