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Strategic Classification

Most acquisitions may be classified according to their strategic significance to the acquirer. The projected price in each type of acquisition depends on the specific characteristics of the acquirer and of the target, and on a correct analysis of the competition in the target's market (see Chapter 9 for a discussion of the impacts of mergers or acquisitions on valuation).

Horizontal Acquisitions

In horizontal acquisitions, the target operates in the same field as the acquirer, such as a merger between telephone companies which operate in the same field but in different countries. A horizontal acquisition is supposed to yield benefits such as an increase in the acquirer's market share, savings on operating costs (economies of scale), and synergy. In many cases, large companies acquire small companies which operate in a certain niche in the general field of the large companies' activity, in order to complement their line of products. Many startups now direct their plans so as to complement the product lines of such companies.


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