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Mergers and Takeovers

BTEC Business

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Mergers
When two companies join to form one new firm, it can be: voluntary, also known as a merger or forced, when it is known as a takeover
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Mergers
Merger activity is an example of integration taking place within industries. This can be: vertical integration, where firms at different stages in the production chain merge and horizontal integration, where competing firms in the same industry merge
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Why Integrate?
Firms are sometimes keen to merge when: they can make savings from being bigger this is known as gaining economies of scale they can compete with larger firms or eliminate competition they can spread production over a larger range of products or services
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Economies of Scale
There are several types of economy of scale: technical economies, when producing the good by using expensive machinery intensively managerial economies, by employing specialist managers financial economies, by borrowing at lower rates of interest
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Economies of Scale
commercial economies, by buying materials in bulk marketing economies, spreading the cost of advertising and promotion research and development economies, from developing better products
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Economies of Scale
There are sometimes problems that can affect integrated firms. These are known as diseconomies of scale firms are too big to operate effectively decisions take too long to make poor communication occurs
Copyright 2007 Biz/ed