Igor Zax, Founder of Tenzor Ltd., published a very detailed article (in International Corporate Rescue) on exacty this topic last March:
http://www.tenzor.co.uk/wp-content/uploads/2009/04/icr6-2-4.pdf
Igor thinks that during the current stage of economic change there is a very strong argument for vertical integration. Industry models are moving from the 'platform model to a more traditional structure' (vertical integration). The reason for this shift is that transaction costs are going up substantially, the cost of credit has gone up and it's availability has reduced, and the ability to mitigate credit risk has been impacted by both the withdrawal of credit insurance and the increased difficulty in obtaining 'traditional' financial products like bank guarantees and letters of credit. (Zax, 84)
Igor goes on to explain that a company with a high degree of consolidation in either sourcing or distribution represents a high concentration in terms of both credit and operational risk. The reality of the platform model is that oftentimes most of its business partners would not have enough capital to absorb a material shock. Thus, there is a clear incentive for vertical integration of the 'middle part' of the chain so that the combined company would have no significant concentration problems since it will have multiple buyers.
