Friday, October 13, 2006

Acquisition - The Stepping-Stone To The Path Of Success

Today, acquisition has become a buzz-word of business. Reports on acquisitions are appearing in print, TV media and Internet endlessly. Big sharks are on the prowl for big fishes; big fishes are chasing small fishes and small fishes are gobbling up smaller fishes. So acquisitions have become as common as wild animals hunting their preys.Because of acquisitions, companies generate synergies especially in pooling resources to face competition. The individual identities and images get blurred after acquisitions.
For manufacturing companies, the raw material suppliers tend to deal with the new entities differently as their combined demands go up. Their combined market share, too, becomes higher and consequently their say in price control assumes more importance. In most cases, the real beneficiaries are the owners and shareholders of the companies after acquisitions.This was exactly the bait used by the steel tycoon L.N.Mittal for the biggest mega-acquisition in the history in taking over Arcelor which raised lot of storm in the corporate world as well as several governments before the new company Mittal-Arcelor emerged as the biggest steel company in the world.
Taking the cue from the saying 'Join them if you cannot beat them', Nippon Steel and Posco are examining various modalities for flexing their combined strength. Tatas have already guarded themselves against any hostile takeover by the giants by enhancing their own shareholdings. Interestingly, Tatas are reportedly working for a $10 billion takeover of Corus - one of the largest steel manufacturers in Europe. Though the company's employees and a section of the public are against such a takeover, it is the will of the shareholders that will ultimately decide the fate as in the case of Mittal-Arcelor.When so many acquisitions and mergers are taking place all over the world, who really benefit - the consumers and general public or only the shareholders of the companies?

2 comments:

Hiren said...

Integration leads to economies of scale which benefits everybody.Reliance benefited a lot from vertical integration though it need not be the same in every case.

Satish said...

Hiren,
You are right in suggesting that benefits of economies of scale are behind the increased flurry of M&As.