Glossary: Vertical Integration

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Vertical Integration – the acquisition by one business operating of another company in an industry that is complementary to its existing business. e.g. a newspaper publishing company acquiring a paper manufacturer.

The parent company can then pocket all the profits themselves and reduce operating costs because all the sub-companies are working for the same team. This can create a monopoly situation and, in the case of investment groups and subprime, substantially increase the risk to the parent company if there is a breakdown in the chain.

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