Mergers & Acquisitions-GOs

 Anticompetitive effects of mergers  Effect on businesses of anticompetitive mergers  Implications of Global Mergers

Company A Company B Company C Company X Company Y Company X MergerAcquisition

 Diversification of trade and service activities  Achieving optimum size of business  Enhance profitability  Widening Customer base  Economies of scale  Pooling resources  Dynamic efficiency  Escaping Gestation Period

Merger HorizontalVertical Backward Integration Forward Integration Conglomerate

 Most likely to raise competition concerns  Reduction in Number of Players  Concentration of Economic Power  Growth of monopoly power/ Dominance

Factors for Anti-competitive effects’ Assessment:  Homogeneity/ Heterogeneity of products/services  Co-ordinated Effects : Ability/ Inability to co- ordinate pricing/output decisions  Unilateral Effects: Ability/ Inability to raise prices post transaction  Ease of entry/ expansion in the Relevant Market  Whether either party is a potential failing enterprise  Likely Pro-competitive effects of the Merger

 No reduction in Number of players  Efficiency enhancing- Unlikely to result in competitive injury.  Likely to produce injurious effects where either party is dominant in the relevant market: 1.Market Foreclosure 2.Facilitating co-ordinated behaviour in upstream/downstream markets

 Most unlikely to result in any competitive injury.  Potential Competition concerns: 1.“Deep Pockets” Theory. 2.Entrenchment 3.Reciprocity 4.Bundling and Portfolio Effects 5.Multiple Market Strategies

MERGERS EXEMPT FROM NOTIFICATION Negligible Impact - Where mergers Are Between Small Enterprises- Small Mergers Not Subject to Review and Approval SMALL MERGERS SUBJECT TO NOTIFICATION No effect on market unless mergers cause AAEC

 Anti-Competitive merger have a lasting and permanent change than anticompetitive agreements  Horizontal Mergers may have an intent of reducing direct competitors and, hence, competition  Price Increase- Increased market power may result in price increase of product or services.

 Before Merger Control was applicable in U.S.  U.S. Standard Oil Co. sought to restrict competition by consolidating refineries throughout the U.S. Into a mammoth enterprise.  Prosecuted and divided into several distinct companies in 1911.

 Competitors provide competitive restraint. Horizontal merger leads to elimination of competitors and concentration of market power in a few hands  Deustche Borse/NYSE Euronext- Within the exchange traded derivative market, the of the two major competitors would enjoy 90% market share. Declared incompatible.

 Primary fear is that where the vertically integrated entity has market power, it may foreclose the market or a source of supply to its competitors.  GE/Honeywell- Vertical foreclosure concerns arose since- among others- Honeywell was the sole supplier to Rolls Royce

 Multi-National Mergers can bring efficiencies and investment in an economy  Global mergers will also bring in new technologies to an economy

 Multi-National mergers can also take away profits to a foreign country  Ownership of the acquired enterprise will flow out of the country  Perceived National Symbols may be considered as valuable by foreign owners

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