Corporate Acquisitions, Mergers & Consolidations
Chapter 1
INTRODUCTION
The activi
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The activity involving corporate acquisitions, mergers, and consolidations constitute a contentious issue in the con temporary American economy.1 During the decade of the 1980s, actions of this type assumed historically high levels of activ ity.2 In this study, the shades of difference between the terms acquisitions, mergers, and consolidations were not rele vant to the study findings, thus, the terms are often used interchangeably in this study. The justification for the use of these terms in this way is explained in the "Definition of Terms" section at a later point in this chapter.The questions raised by the outcomes of many of the acqui sitions, mergers, and consolidations deal with a wide scope of concerns, which range from macro effects on the economy as a whole to micro effects on shareholders and employees. This research study investigated one specific aspect of the corpor ate acquisition, merger, and consolidation activity which 1G. Houseman, "The Merger Game Starts With Deception," Challenge, September October 1986, 44. 2P. F. Drucker, "The Problem of Corporate Takeovers: What Is to Be Done?" The Public Interest (Winter 1986): 17. 1 2occurred in the American economy during the 1980s. This aspect concerned the effect on the operating efficiency of the firmsurviving in an acquisition, merger, or consolidation which was effected through a leveraged buyout (LBO). The term LBO, as it is used in th
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Economy) New York: McGraw Hill Publishing Company, 1982), 183.
18Clarkson, Miller, Jentz, and Cross, 847; Wallner (1979), 4 13; Wallner (1980), 16 26.
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While President Theodore Roosevelt was known as a trustbuster, President Richard Nixon publicly proclaimed that bigness is not necessarily bad in business, a perspective which, in effect, blessed the developing oligopolistic character of most American industries, and which preceded an unprecedented increase in acquisition and merger activity.
The essential economic concepts involved in antitrust are monopoly, barriers to market entry, market concentration, and the exercise of monopoly power within a market. Monopoly, of course, refers to single firm control within an industry or market. Few, if any, true monopolies exist in the United States, exclusive of regulated public utilities. Monopolistic power, however, may be exercised within an industry by a small number of firms, however.
In the United States, scale economies are encouraged, and unfair competition resulting from scale economies is presumed to exist only when accompanied by other unfair trade practices, such as the pricing of goods and services below costs of pro duction, or such as the offering of s
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Approximate Pages = 19 (250 words per page)
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