Forward integration is a type of vertical merger (vertical integration) in which a supplier acquires a manufacturer or a manufacturer acquires a distributor.
Businesses engage in forward integration either to generate a higher margin from a key input which it owns or produces or to better market its products and increase its profitability.
If Intel acquires Dell, it is a forward integration because it is an acquisition of manufacturer by a supplier.
If Dell acquires a distributor of computers such as BestBuy it will be a forward integration too since it is an acquisition of a distributor by a manufacturer.
Written by Obaidullah Jan, ACA, CFA and last revised on