What determines whether a Merger is in Public Interest?
- What is the market share of the new firm at a local, regional, national, and european level? e.g. Tesco not allowed to merge with Safeway, but Morrisons could merge. This was because Tesco / Safeway would have had too much national market share.
- Are consumers likely to face less competition and higher prices as a result of the increased market share? - Too much market power enables firms to set higher prices
- Can the new firm exploit monopoly power in paying suppliers less? - A concern over the merger of Tesco and Safeway was that Tesco's could have squeezed farmer's profit margins even more.
- To what extent does the merger create economies of scale? Are their significant fixed costs in the industry? Is there potential for diseconomies of scale, - firms gets too big and inefficient.
- Does the industry require risky investment in new technologies and products? E.g. oil exploration and development of medicinal drugs
- Is the industry competitive on a global scale. E.g. a national monopoly may face competition from other countries. This may be relevant in the steel industry.
Labels: mergers
Perma Link | By: T Pettinger |
Monday, September 17, 2007
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