Certified Financial Management Specialist Practice Exam

Which of the following is NOT typically a result of a vertical merger?

1. Reduced competition

2. New product offerings

3. Cost efficiencies

4. Absorption of competitors

The correct answer is: Absorption of competitors

A vertical merger occurs when companies at different stages of production or supply chain integrate their operations. The primary aim of such mergers is to enhance efficiency and control over the production process, as well as to secure supply chains. When considering the options, the absorption of competitors is not a typical result of a vertical merger. Instead, this outcome is more representative of horizontal mergers, where companies at the same stage in the supply chain consolidate, often to eliminate competition and increase market share. In contrast, vertical mergers can lead to benefits such as new product offerings due to the integration of different production stages, cost efficiencies by reducing production costs, and potentially reducing competition within specific segments of the supply chain, but not aimed directly at absorbing competitors. Thus, the assertion that absorption of competitors does not align with the nature of vertical mergers is correct, as these mergers focus on creating a more streamlined operation rather than directly eliminating competition.