MERGERS

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Term Paper Title	MERGERS
# of Words	978
# of Pages (250 words per page double spaced)	3.91

MERGERS

Introduction:

Mergers are the combining of 2 or more companies into a single corporation.  In a business, a merger is achieved when a company purchases the property of other firms, absorbing them into one corporate structure that retains its original identity.  In a merger the purchaser may make an outright payment in cash or in a company stock, or may decide on some other arrangement such as the exchange of bonds.  Mergers are often accomplished to revive failing businesses, to reduce competition, or to diversify production.

Types of Mergers:

1. Horizontal Integration: is when a company merges with one at the same level of production.  Ex: A brewery merging with another brewery.
2. Vertical Integration: is when a company merges with another company at a different stage of production.  Ex: A brewery taking over a chain of pubs.  Another Ex: A brewery taking over a hop farm.
3. Conglomerate Integration: is when two unconnected companies merge.

The Positive and Negative aspects of a Merger
A merger lessens or prevents competition mainly when it creates, enhances or preserves market power.  Market power is the ability to profitably maintain prices, quality, service and/or product variety for a significant period of time at levels that are less favourable to consumers than would exist in competitive markets.  A merger can lessen or prevent competition in two ways.  First, a merger, by reducing the number of competitors in a market, can make companies interdependent.  Interdependence among companies in the market means that they would have to jointly exercise market power or limit competition on price, quality, service, variety, or any other dimension.  Second, a merger can lessen or prevent competition by flattering the market power of the merging firms.  This is called exercising unilateral market power.  A merger lets firms unilaterally exercise market power if the merger, by placing the pricing and supply of the products of the merging firms under one control, enhances the profitability of increasing prices and restricting supply (or limiting competition).
Potential of Banks Closing Branches
One of the concerns about bank mergers is the possible decrease in the number of local bank branches that provide the range of services retailers require.  Local branches are the communities’ source for currency and coin for everyday business.  Without the local branch, businesses may have to travel long distances to make deposits or withdrawals. Such ...

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