Why do firms engage in mergers? Describe a recent merger between two firms and identify the reasons for the merger.

Authors Avatar
24th February 2005

Why do firms engage in mergers?

Describe a recent merger between two firms and identify the reasons for the merger.

In the business world, mergers play a vital role in both helping certain markets remain free, help prevent single firms taking over in a monopolistic manner and allowing struggling companies to find a second chance to succeed. There are mergers happening in and around us day by day and although a majority of the public are unaware of the significance of these manoeuvres, the business world can be greatly affected by such actions. The most famous and possibly the best documented merger in recent United Kingdom History was that of Lloyds Bank and TSB Bank in 1995 to create one of the largest forces in domestic banking with the two super banks along with the acquisition of Cheltenham & Gloucester in the same business year. There are several reasons why firms or businesses merge and several different methods of merging. In the following piece of writing, I will explain why and how mergers take place and the effect of mergers upon the Welsh Rugby Union.

Whenever a merger takes place, the merger must comply with the strict regulations of the Competition Commission, an independent board who regulate all mergers to ensure fair trade and acquisitions. Established in 1948, the Monopolies and Mergers Commission (MMC) was the UK body responsible for investigating matters which come under the 1980 Competition Act and related legislation. The MMC has no powers to initiate investigation and therefore no choice as to which inquiries it undertakes. The name has now changed along with various aspects of its role. The MMC is now known as the Competition Commission. The commission would act in a situation such as the attempted takeover of Manchester United PLC by American tycoon Malcolm Glazier. In that situation, the Commission would look at such angles such as competition, stakeholders interest and merger regulations before allowing such a move.

There are several main forms of mergers for different companies who require different outcomes from the merger:
Join now!


* The first type of merger is a Takeover, when one company buys a controlling interest in a second against the wishes of that company's directors.

* Secondly there is a straight merger, when the two firms agree to form a new company, Such as Lloyds TSB Plc.

* Another form is a Vertical Merger, where two firms at different stages of production join together to expand and compete against larger firms, such as Wal-Mart's acquisition of Asda to compete against larger domestic firms such as J Sainsbury's and Tesco.

* The final "style" of ...

This is a preview of the whole essay