In the News
Horizontal Integration - Vistry Group and Countryside to merge in £1.3bn deal
Vistry Group (formerly Bovis Homes) and Countryside are set to merge in a deal that will create one of the largest house-builders in the UK construction industry.
It is a good example to use when thinking about some of the benefits and also the possible risks from horizontal integration - the joining of two businesses in the same industry and at the same stage of production.
As usual, the merger statement is accompanied by ambitious plans for the enlarged business to achieve cost synergies - what might these be? Can you think of some examples of economies of scale that a larger house-building firm might be able to exploit?
But there are always risks involved. The majority of mergers and takeovers do not lead to the cost and revenue synergies predicted. Often there are clashes of corporate culture to overcome. And there might also be some loss of human capital as workers leave.
The wider issue is the chronically low level of new housebuilding in the UK which is a key factor behind supply shortages and very high prices both to buy and also to rent. The UK construction industry has also for many years suffered from shortages of skilled labour - a challenge made harder by the UK's exit from the European Union.
Will this merger do anything to address this issue?