What type of merger combines firms to diversify their products and increase their customer base?

In the context of mergers, a horizontal merger refers to the combination of firms that operate in the same industry or sector and generally offer similar products or services. This type of merger allows the resulting entity to diversify its product offerings while increasing its market share and customer base. By merging with another company at the same stage of production, firms can benefit from economies of scale, expand into new markets, reduce competition, and enhance their overall product range.

The other options represent different strategic moves: a vertical merger involves companies at different stages of the supply chain, such as a manufacturer merging with a supplier. A conglomerate merger occurs when companies in unrelated business activities combine; this is not focused on increasing a specific product line or diversifying within the same market. An acquisition refers to one company taking over another, which may not always lead to diversification or increased customer base in the same manner as a horizontal merger does. Thus, a horizontal merger is specifically aligned with the goal of diversifying products and broadening the customer base within the same industry.