Advantages And Disadvantages Of Mergers

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The purchase of a company by another (acquisition) or the union of two companies, giving rise to a larger one (merger) constitute one of the more current ways to gain dimension and competitiveness. Generally, these types of business operations are caused by the identification of a threat or an opportunity in the market. We are currently in the peak moment of this type of operations, both globally and nationally. In the year 2006, even the last record, dated in the year 2000 and founded on the technological bubble. This time, the pressures to the sale or merger of companies come from different factors. On the one hand, the boom of the economy and the positive evolution of the stock markets (when the stock market rises, companies are worth more…show more content…
Thus, the high ratio of the energy sector is mainly due to the need to Position yourself in the new sources of energy. In the computer sector and telecommunications, the triggers are constant innovation and the demand for Knowledge economies. In contrast, the strong activity in M & A of the sector insurer is explained by the growth in accrued premiums and of strong competition (fight for customers, for new distribution networks and for the penetration in other geographical areas). The high ratio of operations presented the food sector in almost all its subsectors is explained by the large competition, both in the domestic market and by foreign companies, to which is subjected. Added to this is the strong need to control the chains of supply, to have an adequate distribution of merchandise, to diversify their products and consolidate their brands. the concentration of companies can be beneficial for business productivity, but it can also hurt the total welfare if the operation reinforces market power, damaging the free competition and increasing the prices of products without increasing their quality. He monopoly power induces inefficiency and waste, and some degree of rivalry to maintain a good pace of innovation in the industry. The mergers horizontal are a priori the most damaging to market competition, although the…show more content…
Mergers and acquisitions are one of the main instruments used by companies to carry out the structural change they need, and to increase its size quickly. These types of operations represent an opportunity to achieve economies of scale and scope and to increase innovative capacity of the company. The challenge of public policies is to allow the necessary restructuring in certain sectors and the increase in business size, protecting the same time the competition. In continental Europe, the defense legislation of the competition is stricter than in the United States or the United Kingdom, when considering the decision to approve the operation other factors than the injury of the effective competition, such as European integration or the promotion of
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