In this paper, we present a new theoretical framework for the quantification of strategic advantages associated with horizontal mergers through the integration of supply chain networks. The framework is a system-optimization one in which each firm is represented as a network of economic activities associated with manufacturing, distribution, and storage with explicit capacities on the links. We present the models pre- and post- the horizontal mergers and define a measure for the quantification of the gains, if any, associated with the mergers. We illustrate the framework with several numerical examples. For simple classes of mergers we derive formula for the strategic advantages.