Merger, Acquisitions And Market Powers Across The European Union

Merger, Acquisitions And Market Powers Across The European Union

Before two entities come together in a business relationship, several considerations are made in assessment of the viability of the idea of a merger. When the European countries arrived at a decision to have a common market, it became necessary for companies existing at national level to come together in order to enjoy the great opportunities that had just presented themselves. This itself being a good thing does not imply that it had been a perfect situation especially for smaller companies. Companies that come together and unify their operations are likely to benefit more as their individual customers are likely to be brought over after the merger. It also could be an opportunity for companies to market themselves in countries that they have not been before. The effect of this on the small companies however may not be very pleasant, and they may as well have to follow suit. It is only normal that whenever there are giants around the smaller animals feel threatened. So what does it exactly mean in terms of market power for the smaller firms? This paper will make use of examples of companies that have come together in various parts of the European Union, and mention the consequence of that merger in the greater picture.

Mergers and Acquisitions

The introduction of European commonly currency elicited a new wave of trade not only in the continent but also in the larger world. Companies have been joining each other in strategies aimed at helping the companies remain relevant. Some other companies have been acquired by other better of companies. Mergers involve companies coming together without necessarily being swallowed by the partner (Kiell, Odd, and Lars, 2006: 214). This has often been the choice of many companies. Acquisition on the other hand could mean that part of a company or the whole of it has been taken over by another. In most cases, these kinds of moves are taken when businesses are not doing very well. A good example of such a company is the Slovenian company, Saturnus Avtooprema, which was taken up by Hella while on the verge of collapse. This company had already lost its customers before it eventually merged with Hella. Both specialized in the production of lights for motor vehicles. This move saved Saturnus from total loss. When mergers take place, it is normally between companies that specialize in related operations, which imply competition (Hunbas, Molyneux, and Thornton, 1997: 318). However, this does not imply that once companies join hands the competition is gone. It might as well have been raised to a higher level. When small companies come together and harmonize their operations, the resulting effect is stronger foundation which gives them the ability to compete with bigger companies. In France, for instance, Neuf Telecom merged with Cegetel in order to survive the onslaught by the bigger France Telecom. This way these companies have managed to not only remain a float, but also to maintain a remarkable financial growth. In any market, there would be few large companies, and several small ones. This gives the large company great advantage in terms of coverage and both quality and quantity of goods or services produced. If two large companies, within the same specialization, join hands, they are even more likely to go far (Figstein and Maria, 1996:12). This has been seen in the last few years. A major advantage that goes to the customers eventually is that when competition is stiff, companies are forced to become more creative, constantly bringing up new and often better quality products to counter the competition. This automatically means that the customer enjoys better quality. There is a possibility of two companies merging their operations to create monopolistic market situation. This is obviously likely to bring a lot trouble for the small companies within the same line of production. When a company takes charge of the market, it means that it is not threatened by any other in any substantial way (Wilberforce, 1996: 214). This may sometimes fuel laxity, making them lower the quality of their products, and perhaps prices as well because they enjoy the economies of scale. This pushes the smaller companies even further down. Companies operating within the European Union have realized that the effect of globalization calls them to go beyond the national boundaries. This awareness has fueled a trend where big companies come together in business (Cabral, 2000: 47). This trend has made competition in the European Union to remain between big companies. This leaves the smaller companies with only very few options. They can either join with other smaller companies and save themselves from possible collapse, or remain independent at the risk of going under. The picture for the consumers is in many ways different from that of the smaller companies. When giant companies compete, as already mentioned, better quality products at better prices are seen. This is exactly what every consumer wants, value for whatever money they have. However, the behavior of consumption is quite often informed by a wealth of factors, it could be cultural, economic, environmental or even psychological. If a local company is acquired by an international one, there is a possibility of the consumer loosing the product as they knew it, or as they liked it, because the interests and the original intention in the foundation of the company would be totally different with that of the acquiring company. This means that the consumers may have to adjust their tastes to what is offered to them by these bigger companies. Companies that are not doing well are more likely to either merger or be acquired by another. This means that their production may not be sustainable, and that the employees are likely to lose their job. In several cases this has happened, but in other cases these mergers have saved employees from job losses. When Renault bought off Dacia, a Romanian company its operations were greatly boosted. The number of cars produced was increased twofold in about three years, not to mention the boost it gave to the Romanian economy.

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