What is a corporate mega-merger? Well, a merger is when you combine one thing with another making it one, but what differentiates it from a combination is that in a merger, you only take the good part from one entity to another. A corporate mega-merger is, therefore, is joining two large companies or corporations into one large company. This kind of process usually takes billions of dollars of investments and involves big chunks of shares.
Benefits of a Mega Merger
Since mega-merger involves merging two very large companies into one, it poses greater opportunities for a company. For example, Apple and Disney buying shares from Pixar made a software and computer-producing company get in touch with an animation-based company allowing it to expand its opportunities from mainly software computers to the animation industry. Whereas Disney, being an already large cartoon company has heightened its ability to produce animated films and shows.
This means that mergers are an effective way to expand a company, not only earning it more profit but a larger opportunity to grow and expand. Merging companies mean, you get to explore both sides of the organization and exploit the advantages of one from the other.
Mega Mergers in the US
You may have heard plenty of famous companies that have merged, an example apart from Disney and Pixar, are Yahoo and Facebook, AOL and Time Warner Bros., Daimler-Benz and Chrysler, and who could forget the day when Microsoft bought Nokia and many more companies that have produced well through merging their investments with one another.
One of the latest mega-merger deals is with one of the biggest US Telecommunications companies AT&T and that of DirectTV, which is one of the largest mergers in history.
This kind of innovation provides new opportunities for people to explore new products and services and expand their market value and of course their line of customers. If we look into another side of mega-mergers, they hinder small companies from competing with these giants in the market field hampering the possibility of innovating. Take for example Facebook’s attempt on exploring and utilizing web chats, this hampered Facebook from further innovating internally because it saw the possibility of another, hindering a small company to grow
When a large company merges with a small company it prohibits a big company to grow to its full potential because the money offered by this larger company would inhibit its possibility of growing even larger. The process of discovery fuelling small business owners to create greatness of their own is then stopped.
Corporate Mega Mergers only feed the already mega companies but would pose a threat to emerging ones, especially if these emerging ones have potential.
Rather than turning into mergers, companies should just go into partnerships. In that way, small companies can grow and innovate rather than be restricted by the goals of the merger company they are in business with. Mega-mergers may be a smart move for Giants, but these giants are hampering innovation from happening.