BUS: Response to Comments

Comment 1: A factual comment.The synergy effect increases through both horizontal, vertical, and other forms of acquisition. The synergy in acquisition or merger increases when the two companies’ combined value is greater than pre-merger/acquisition combined. The synergy effect increases market share, improves sales and market positioning of the firm, profit margins, and the new firm’s asset base (Harumová 2020).

Comment 2: A great insight on the vertical acquisition. Some of the most important benefits of the vertical acquisition include reducing costs and full control of the company’s supply chain. When companies integrate vertically, they can control critical costs such as transportation, material, and production costs, offering lower prices. The firm also ceases to be dependent on the suppliers and the unpredictability and cost that come with it, as it gains full control of the supply chain as for the case of a clothing manufacturing company acquiring a textile company.

Comment 3: Great insight on the impact of the company image during acquisition. The company image or reputation plays a key role in shaping the public perception of the company. When a company acquires another firm with a positive brand image, it can use the present customer perceptions to improve customer connections. However, acquiring a company with a bad reputation can ruin even the good image of acquiring company.

Comment 4: Yes, horizontal acquisition reduces competition and increases the acquiring firm’s market share as one competitor is eliminated through acquisitions. Since horizontal acquisition entails buying a company in the same industry, the acquiring firm increases the scope and range, allowing the newly formed firm to pool customers and attracting new clients.

Comment 5: Vertical acquisition or integration happens when the acquiring firm’s strategy is to own or control the supply chain; suppliers, retail location, and distributors. By this, the firm can control its value, including the quality of its products or services.

Comment 6: Indeed, vertical, horizontal, and related acquisitions contribute immensely to a competitive firm’s overall success. Amazon is an example of a firm that has achieved immense success through acquisition. The company spent most of its first two decades acquiring and investing heavily in startups, investing in at least 128 firms globally, from Paris to Dubai (Zoe, 2017).

Reference

Harumová, A. (2020). Model H application to determine synergic effects on merger and acquisition. In SHS Web of Conferences (Vol. 83, p. 01021). EDP Sciences.

Zoe, H. (2017). Amazon Has Acquired or Invested in More Companies Than You Think–at Least 128 of Them. Amazon Spent the Past Two Decades Acquiring or Investing In Startups Galore. Inc.