We use industry commodity flows information to measure vertical relations for completed mergers during 1962 to 1996. Almost one-third of the mergers display relations that provide opportunities for vertical integration between merging firms. Vertical mergers generate positive wealth effects that are significantly larger compared with those for diversifying mergers; the wealth effects in vertical mergers are comparable to those in pure horizontal mergers. We find a significant, positive co-movement in vertical merger activity and wealth effects, consistent with economy-wide shocks that affect both the incentives for firms to integrate vertically and the resulting efficiency gains from such mergers.