To Clear or Not: Examination of Mergers and Acquisition Cases from Small Economies
- Bobby Maharaj
- Mahendra Reddy
In an increasingly competitive market, the corporate sectors in small developing countries are adopting a number of strategies to deal with raising efficiency and productivity. One such strategy is consolidation, that is, mergers and acquisitions. One of the primary motive to undertake a merger is to gain the synergy that would accrue from more efficient management, economies of scale and scope, removal of duplication of resources, utilization of resources to their full potential, and improved production techniques. This study examines the basis of mergers and acquisitions (M&A) and utilizing two recent cases of M & A applications, provides a theoretical and practical basis to decide on whether mergers and acquisitions will be allowed or not. In doing so, we demonstrate the process and methodologies utilized to assess and examine an M & A application. The first case involves a conglomerate merger in the beverage industry while the other involves an acquisition in the same industry. In both the cases, the M & A application was cleared. In the first case, the merger involved two different kinds of beverage activity - alcoholic and soft drinks beverage hence there was no effect on the market share of the individual products. In the second case, while the acquisition was in the same industry, a detailed financial analysis of the acquired firm reveals that it is a “failing firm”, and therefore, in the public interest, the acquisition needs to be cleared.
- Michael ZhangEditorial Assistant