In this type of merger, different business units which have been competing with one another in the same business line join together, form a combination. It eliminates cut-throat competition and helps to secure economies of large scale operation; and thereby, reduces cost per unit of output. However, this does not assure the supply of raw materials and has a tendency to acquire monopolistic power in the market.
It is a merger between two or more companies which are in direct competition with each other as both are operating in same industry. The main objective of this type of merger is to obtain economies of scale in production by eliminating duplication of operations and facilities.The motives behind this merger are reduction in competition, economies of scale, research and development, increased market share.
Example : Merger of SBI and its subsidiaries