What is Backward Integration?
In the world of business, it is not unusual for one company to acquire another corporation that has resources or produces goods or services that are important to the welfare of the company. When a company chooses to buy a corporation that has been a steady supplier or vendor, this is referred to as backward integration. Here is some background on how backward integration works, and why this type of transaction may be appealing. The process of backward integration usually begins when a company becomes aware that the product of service line offered by one of the company’s vendors is especially attractive. This attraction may be built on the fact that the products that are currently purchased have worked out very well, and are helping to improve the quality and bottom line. As it appears that a long-term relationship with the vendor seems imminent, a company will often begin to look at the overall costs of doing business with the vendor. If it appears that acquiring the vendor and integra
