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

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Introduction

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. ...read more.

Middle

Now that I have examined why and how companies merge together, I will now give and example of a merger that has taken place in recent years and one that is of large interest to myself. In Wales, until October 2003, there were four divisions of professional rugby teams each competing in respective divisions. The teams were all either towns or cities such as Cardiff, Swansea and Llanelli. However, the interest in Welsh rugby dropped due to limited success in all areas. From the period of 1987-2003, the Welsh Rugby Union (WRU) had planned radical changes to promote the game of rugby and "stop the rot" that was occurring in the business side of the game. The Merger was planned for the following reasons: * There was a drop in interest in the game of rugby due to lack of success and in international home matches, an average of 73% attendance was reached, lower than Italy, Scotland, England & France. * Merchandising sales had fallen with replica shirt sales down 37% from 1999-2001 and needed to improve to help boost the economy. * The merger was seen as an ideal way to make use of greater economies of scale. * Improve quality of welsh completion in European competition for greater grants from the International Rugby Board (IRB). ...read more.

Conclusion

* The average attendance for Neath Swansea Ospreys increased from 3'034 in 2001-03 to 4'634 in 2003-04 and is now 6'400 for the 2004/05 season. * On top of this, Welsh regional sides have benefited from qualifying for the quarter final stages of the European Heineken Cup, which offers prize money of over �1'000'000 to the winner. * The increased quality in rugby set-up and profits have allowed more money to be spent on youth development to help the game progress in coming years. * The Welsh national team has moved from being a poor outfit to a side who are on track to win their first six-nations for more than 20 years, a feat that would not have been possible without the mergers between the domestic rugby clubs in Wales. Although the rugby has benefited greatly, the community and spirit in Welsh pubs and bars has sky-rocketed due to the success of the National team. Dave Williams, owner of the New House Inn, Cardiff, Wales commented that: "the supernormal profits that have come about during the last few weeks can only be down to how well the team is performing, every game day the fans are here in there tons and we are taking more in that we would do on New Years Eve." This is conclusive proof of the success of the mergers in Wales and the effect on both the local economy and national pride. ...read more.

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