Which merger involves firms at different stages of production?

A vertical merger involves firms at different stages of production because it typically occurs when a company acquires another company that is either a supplier or a distributor in its supply chain. This type of combination allows companies to streamline operations, reduce costs, and gain better control over their production processes and distribution channels. For example, if a manufacturer of automobiles merges with a parts supplier or a dealership, this creates a vertical relationship where the merged entity controls more of the production and distribution stages.

In contrast, a horizontal merger occurs between companies that operate at the same stage of production or within the same industry, aimed at increasing market share or reducing competition. A conglomerate merger involves companies in completely different industries or markets and does not focus on production stages. Lastly, a market merger is not a standard classification in corporate finance, making vertical the most appropriate categorization for firms at different production stages.