How to Create Value
New Perspectives on the Modern Corporation series
Chapter 6: Vertical M & As
In this chapter we examine the different types of vertical M & As and the conditions favouring these strategies. The analysis follows the lines already discussed in the previous chapter with particular focus on transaction costs as a relevant and specific factor of vertical M & As. After the analysis of advantages and drawbacks in vertical M & A, the conditions for a vertical M & A which creates value are defined through an analytical model. The analysis highlights that high transaction costs and efficiency in intermediate product markets are the most important external conditions for vertical M & As to create value. Conversely, capabilities in increasing efficiency by integrating processes and by exploiting asset and resource relationships result as being the most important internal factors for successful vertical M & As
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