Skip to main content

Mergers and Acquisitions are expensive for corporate growth




There has been a rise in the amount of mergers and acquisitions across all sectors. In the wake of the global economic slowdown, it has helped in consolidation. A merger is the convergence of two firms, in the same or allied sectors, that see synergy in them working together. An acquisition is a purchase of a firm by another firm as a part of its strategy to either expand or consolidate. But mergers and acquisitions come at a cost to both the corporate and the customers.

Consolidation, as a result of M&As, leads to reduced competition. As the number of companies in the sector gets reduced, it is easier for the new firm to increase prices. We saw such increase in the aviation sector after the acquisition of Deccan air by Kingfisher and that of Sahara by Jet airways. There is also a chance of cartel formation when the industry has just 3-4 major players.

M&As are good for bringing stability but are bad for innovations. When two firms merge to form a bigger unit, they are more concerned about consolidation than innovation. Companies like Pepsi and Coke in the beverages industry and Google and Microsoft in the software industry have prevented the growth of smaller, more innovative firms by acquiring them. Microsoft has ensured its monopoly in the OS software through such strategies and has also been convicted in courts for these charges.

Acquisitions of bigger firms by firms much smaller than them have often resulted in big failures. These aggressive acquisitions lead to instability. Tata Steel's acquisition of Corus, a company six times its size, is one such example. Tata Steel's management is finding it hard to manage a company of this scale. Over the world M&As have also resulted in job losses for the employees.

Although consolidation and M&As are a necessity in these times of economic slowdown, but the companies must remain ethical in their conduct. When the companies become "too big to fail", they become a huge liability. They must always keep in mind that innovativeness, not size, is the answer in times of adversity.

Comments

  1. AnonymousOctober 22, 2013 at 11:35 PM

    Mergers and acquisitions are a very essential aspect of business. As mergers and acquisitions usually represents anything to do with purchasing, promoting or becoming a member of businesses and companies. In common utilization the individual conditions of 'mergers' and 'acquisitions' have maintained to cloud together, but actually mean individual and unique things.

    Mergers and Acquisitions

    ReplyDelete
  2. AnonymousNovember 18, 2013 at 8:31 PM

    All mergers and acquisitions are expected to be done for the advantage of the stockholders of both organizations. Actually this may not be always real. Those who have shares should properly research suggestions for mergers and products before agreeing to the shift.

    Mergers and Acquisitions

    ReplyDelete
  3. AnonymousDecember 16, 2013 at 8:07 PM

    In modern company situation, mergers and acquisitions are the order of the day, and for the providers working in the B2B space, this is a fantastic opportunity to get more company, since new roles are created and company goals are expanded. This results in room for a lot of new alliances, since the company is in super speed method for at least several years. In such a situation, companies that partner with organizations dedicated to prospecting freelancing drive amazing success.

    Mergers and Acquisitions

    ReplyDelete
  4. UnknownDecember 9, 2014 at 5:37 AM

    All mergers and acquisitions are expected to be done for the advantage of the stockholders of both organizations.Thank you so much

    Mergers & Acquisitions

    ReplyDelete

Post a Comment

Popular posts from this blog

He who knows how to be Poor knows Everything

In today's materialistic world, being poor is the worst thing that can happen to you. Being educated, being moralistic and being principled amount to almost nothing if you are poor. There are no opportunities to come out of that quagmire. Someone who has been through this and has somehow overcome the mountain of difficulties, would possess incredible amounts of determination, will and belief in his ability. Such talent is rare but often results in producing the greats. Being poor teaches you time management, how to make the most of your time to survive. It teaches you adaptability, how to adjust to the extremes of living conditions. It pushes you to extend your boundries and grow farther. It makes you emotionally and mentally strong. Someone who has been facing defeat after defeat but still gets up everytime to face adds so many facets to his personality. You learn only from your mistakes. If you have never faced defeat, it would be hard to survive. To relate to my own l...
1 comment
Read more

Belief in Virtue is more important than Virtue itself

Just pause for a second from your daily life. The life that you are so desperately trying to organise, to make worthy, to make grand. The future plans that you are putting together, the aspiration and the fantasies; put them aside and think about this- "We spend a lot of time trying to organize the world, we build clocks and calendars and we try to predict the weather but what part of our life is truly under our control. What if we choose to exist purely in our reality of our own making, does that render us insane. If that does, isn't that better than a life of despair?" Rationality and irrationality is purely subjective. Also what's better is only a matter of how deeply you apply your thoughts to it. If being happy and content is all that you want in life, then isn't living an insane life in a world of your own, the perfect thing for you. The problem with us is that we don't know what we actually want, and when we do, we hate to accept them and instead...
2 comments
Read more

The God Delusion

People all over the world create delusions around themselves, a persistent false belief held in the face of strong contradictory evidences. In India alone we have 33 crore Gods to choose from, for the 100 crore population; a sort of personalised delusion for everyone. In addition to that there are crores of God men. The social structure is so formed that it makes us oblivious to the delusion. We continously doubt our own abilities, and associate results to the blessings of some higher beings. The degraded self-esteem is what pushes you deeper into the delusion. To quote Douglas Adams - "Isn't it enough to see that a garden is beautiful without having to believe that there are fairies at the bottom of it too?" The belief that the world was created by some God and that everything in this world is His creation is fundamentally flawed. If he created everything than who created Him. Putting the creation of everything under the ambit of one entity was to simplify the exp...
8 comments
Read more