Admin Table of Contents
Can the government prevent two companies from merging?
The laws that give government the power to block certain mergers, and even in some cases to break up large firms into smaller ones, are called antitrust laws.
Why do mergers require government approval?
These governmental approvals are important for a bunch of reasons. First and foremost, they can prevent a transaction from happening. And they can also require significant changes be made to the transaction which may not be acceptable to the buyer. Bottom line, the government can mess with your deal.
Which government agency approves mergers and acquisitions?
The FTC
The FTC and the Antitrust Division of the Department of Justice have concurrent jurisdiction to review mergers and acquisitions and enforce the federal civil antitrust laws.
Who is responsible for mergers and acquisitions?
The board’s principal responsibility is to protect and enhance stockholder value. Mergers and acquisitions offer one way that stockholder value can be increased. The board’s principal role is strategy, oversight, and governance.
Why government should regulate mergers between firms?
Regulation is based on the concern that mergers inevitably eliminate competition between the merging firms. Mergers can bring better management or technical skill to bear on underused assets. They also can produce economies of scale and scope that reduce costs, improve quality, and increase output.
What is the main reason that most mergers and acquisitions?
Improving Both Companies Synergy is the most often cited reason for a merger or acquisition. A company will often decide to merge with another company because the weaknesses and strengths of both organizations complement each other. Improving financing is another common reason for mergers and acquisitions.
Can the FTC block a merger?
In most cases, the Bureau receives notice of proposed mergers under the Hart-Scott-Rodino (HSR) Amendments to the Clayton Act. When necessary, the FTC may take formal legal action to stop the merger, either in federal court or before an FTC administrative law judge.
Who oversees mergers and acquisitions?
Because the FTC and the Department of Justice share jurisdiction over merger review, transactions requiring further review are assigned to one agency on a case-by-case basis depending on which agency has more expertise with the industry involved.
Why do mergers and acquisitions happen?
The most common factor is the potential growth of the business. A business merger may give the acquiring company a chance to grow its market share. They can reduce the costs of developing business activities that will complement a company’s strengths. The acquisition can also increase the supply-chain pricing power.
How do governments prevent mergers?
The competition and markets authority often investigate mergers that result in a market share of around 25% or more in order to prevent uncompetitive outcomes in the market. If they believe that the merger will result in outcomes that are not in the public’s interest, then they will block the merger.