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Finance allah shmoop What is the difference between a horizontal

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merger and a vertical merger Okay Mergers let's talk rock

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As in a feller he was kind of the king

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of mergers both vertical and horizontal Let's Talk about what

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comprises each of these things All right in the energy

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industry specifically oil Ah horizontal monopoly would exist if a

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company owned all the oil wells in the world And

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in fact for a short time opec owned well it

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was very close to a monopoly at least an enormous

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percentage of all the oil wells in the world such

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that they were able to constrain supply create panic and

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increase prices dramatically some five hundred percent and change the

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world during the nineteen seventies when we had a very

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weak president going against them and here's what inflation adjusted

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prices for a barrel of oil looked like in that

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period So that's a horizontal monopoly like where you own

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all the sources of oil coming out of the ground

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horizontal So what's a vertical monopoly Well in the process

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of processing oil a lot has to happen for the

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system to work right first step you have to pull

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All the oil out of the ground right the oil

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well but then you have to process it or synthesize

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it from dinosaur coop into well something that's actually usable

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in your lexus with the turbo engine Then because the

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world demand is continuous you have to store the oil

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and then distributed continuously forever and ever and ever and

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eventually the retail customer buyer has to be ableto pull

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up into a gas station think real estate here and

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fill her up So if you owned a vertical monopoly

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while you would own the discovery and mining of oil

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the synthesis or processing of it or refining of it

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as it's called in the industry you don't a storage

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company a trucking and distribution company and while then a

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bunch of gas stations well that would be a fully

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integrated vertical monopoly So when horizontal and vertical mergers get

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discussed they get framed under this format So let's say

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we're coric coffee machines and we want a vertical merger

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in our business because we're sick and tired of paying

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coffee growers twelve cents a cup for something well that

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cost them less than a penny So we at keurig

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Decide to buy our own coffee plantation roasting and grinding

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and processing company so that we can supply our own

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coffee in our own little cups Well that would be

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a vertical merger in the coffee business And it often

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makes a lot of sense because all that profit that's

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been given out to coffee vendors selling to the kindly

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loving caffeinated folks at koi rig with then be capped

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and retained by the kindly loving shareholders of keurig vertical

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versus horizontal Good ways to emerge and good ways to

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have a baby too But we're a g rated site 00:02:51.243 --> [endTime] so we're just just saying moving on Oh

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