At its core, horizontal integration is the term used to describe the merger of two or more corporations that operate in the same areas of production. In layman’s terms, it means that a company has bought out and absorbed another that is a direct competitor. One of the major problems with horizontal integration is that it can result in a monopoly if done in a way that won’t allow for competition. However, many companies have been saved through horizontal integration and rolled into a larger, more successful company.
Horizontal Integration Examples
In many instances, news stories involving mergers and acquisitions refer to horizontal integration. This is because horizontal integration examples in media refer to a company increasing its production, whether of goods or of services. To truly fall into this category, this increased production must occur in the same part of the supply chain. Horizontal integration can involve mergers and acquisitions or it may refer to a company that has grown via internal expansion.
It isn’t always easy to maintain a corporation after this sort of structural change, but a properly planned strategy may prove successful. Following are several horizontal integration examples today and the companies that have made the process work for them.
1. United Airlines and Continental Airlines
In May 2010, United Airlines (known then as UAL Corporation) acquired Continental Airlines. The merger also granted stakeholders 1.05 shares of UAL stock for each share they held in Continental Airlines. Once the shares transferred over, the company agreed to change its name to United Continental Holdings.
In this way, the airlines were able to provide more service to customers while also streamlining their processes. Stakeholders benefited when the companies initially merged, and once the two were completely combined, United Continental Holdings became the largest airline in the world.
2. Heinz and Kraft
In March 2015, Kraft acquired Heinz to become the Kraft Heinz Corporation (KHC). The deal was valued at $46 billion USD. One of the first things that KHC did was to make cuts in any existing redundancies in an effort to boost profits.
This illustrates one of the ways that a merger can benefit both companies. When merged through horizontal integration, companies that used to compete can cut back on any products that are not performing well in the consumer market and focus on their strongest performers.
3. Walt Disney and Pixar Animation Studios
In 2006, Walt Disney bought Pixar Animation Studios for approximately $7.4 billion USD. Walt Disney had been facing stagnation during the jump from cell animation to digital. Pixar, by contrast, didn’t have Disney’s legacy, but it did have newer techniques and more modern technologies to produce digitally animated films.
This merger proved extremely beneficial to both companies, even without merging the “houses” that produced the animation. Pixar’s innovation, when combined with Disney's formulaic storytelling method and top-notch character marketing, led to both increased market shares and spikes in profits.
4. Facebook and Instagram
In 2012, Facebook acquired Instagram for an estimated $1 billion USD. The social media industry has thousands of applications and posting capabilities, but Instagram was a true competitor with Facebook for younger markets and for ad space. In the merger, Facebook strengthened its social media position and removed the competition from Instagram. Similar to the structure of Disney and Pixar, Instagram still operates independently with its own teams, but it is owned by Facebook.
With this acquisition, Facebook was able to focus development on improving Instagram and Facebook, instead of on competition between the two. This leads to larger profits and more user satisfaction on both platforms.
5. Arcelor and Mittal
The combined entity of Arcelor-Mittal is the world’s largest steel producer. It was so named from the companies that joined together to create it, Arcelor SA and Mittal Steel Company.
After the merger, LN Mittal was named as the president of Arcelor-Mittal and became the majority stakeholder in the company. The merger created a massive global manufacturer that is responsible for around 10 percent of the world’s steel production.