Wanna Argument?
Why are there so many takeovers if there's little evidence of their success?
Targeting new markets in South East Asia? A Takeover might help. © Dreamtime.com
The benefits of two firms combining to form one larger company are detailed in the further sources to this Argument. But a brief synopsis is given below of the reasons for the high frequency of takeovers at present:
- Ability to compete on a global scale - large firms with significant presence in national markets need to combine if they are to compete in the huge new markets developing in countries such as China and India.
- Synergies - companies can form a stronger single whole if they can blend the strengths that they have individually. So, a financial services firm that is strong in pensions products might want to combine with another company that dominates the market in selling insurance.
- Vertical integration - firms often look to exert greater control of their markets by buying up other companies 'upstream' or 'downstream'. For example, an energy supplier might want to combine with an energy generator.
- Individual enrichment - individual executives, shareholders, even workers can benefit financially as a result of takeovers. Then there's the whole range of advisers, bankers and others who make money in fees charged as part of the merger business.