M&A activity is the primary source for growth in the Technology Industry. The two types of acquisitions which facilitate growth are Horizontal Acquisitions when a tech company acquires another tech company and Vertical Acquisitions when a tech company acquires a manufacturing company or other company which provides a service to the tech company. Horizontal and Vertical Acquisitions are not mutually exclusive. Tech organizations routinely enter into both types of transaction to facilitate growth.
Horizontal acquisitions in the tech space involve the acquisition of another tech organization which is in the same market, i.e. Tech company acquires it’s competing tech company, such as Facebook acquiring SnapChat and Instagram. The main benefits of this form of acquisition are that it eliminates market competition and increases your market reach automatically. The newly combined power and reach give the company a competitive edge over other competitors. However, a downside is that you also acquire the risk associated with the acquired tech organization which may decrease its value.
Vertical acquisitions in the tech space involve the acquisition of a tech company in a different market. As a larger tech enterprise, the acquiring company has access to multiple markets to diversify its portfolio and increase revenue streams. Also, by joining entities across the tech market, this allows improvements in quality and cost efficiency of care, which in turn are bestowed upon the patients/customers. Quality of care and cost of care are the major concern in the tech industry. Vertical acquisitions allow for the development of consolidated payment plans and streamlined treatment which benefits the customer.