Theories Of An Oligopolistic Market

Mergers and takeovers are forms of external growth within a business. External growth occurs when one firm decides to expand by joining together with another. A takeover specifically refers to the gaining control of a firm by acquiring a controlling interest in its shares (51%). Merger, on the other hand, means the joining with another firm to form a new combined enterprise, shares in each firm are exchanged for shares in the other.

Omnicare, Inc., (NYSE: OCR) and CVS Health Corporation (NYSE: CVS), are two competitive firms in different industries. A press release announces that “CVS Health and Omnicare sign a definitive agreement for CVS Health to acquire Omnicare” ("CVS Health and Omnicare Sign a Definitive Agreement for CVS Health to Acquire Omnicare," 2015). The purpose of this paper is to discuss the merger of CVS and Omnicare. First, the paper describes the principal firms in the merger and the industry in which each operates. Secondly, the paper discusses the incentives to consolidate from the viewpoints of each firm. Thirdly, the writer explains the competitive environment in the industry and how it benefits the firms and society.

In this article Michael Baker discusses the livelihood of small retailers in a market subjugated by the financially dominant oligopolies, Woolworths and Coles. While the small independent retailers in direct competition with Woolworths and Coles provide some competitive respite for consumers, as they encourage competitive pricing, albeit predatory pricing, it is clear that Woolworths and Coles control the supermarket industry in Australia, in the formation of a duopoly. It is evident that Woolworths and Coles engage in predatory pricing in an attempt to eliminate independent retailers from the market. This article discusses recent efforts made by the Australian government and the Australian Competition

Through the cumulative abnormal returns (CARs) that a company receives from the merger, we were able to see the effects of second requests and complaints on the company’s stock price over time. This methodology of using event studies to gauge the effects of mergers and the antitrust agency involvement was first applied by Eckbo (1983), and most recently by Filson, Olfati, and Radoniqi (2015). The event studies used in both of these journals and the others mentioned within the review of literature give us a good understanding of how accurate event studies are for predicting the effects that second requests or complaints given out by antitrust agencies can have on merging firms and within their

Mergers and acquisitions have become a growing trend for companies to inorganically grow a business within its particular industry. There are many goals that companies may be looking to achieve by doing this, but the main reason is to guarantee long-term and profitable growth for their business. Companies have to keep up with a rapidly increasing global market and increased competition. With the struggle for competitive advantage becoming stronger and stronger, it is almost essential to achieve these mergers. Through research I will attempt to dissect the best practices for achieving merger success.

A merger is a partial or total combination of two separate business firms and forming of a new one. There are predominantly two kinds of mergers: partial and complete. Partial merger usually involves the combination of joint ventures and inter-corporate stock purchases. Complete mergers are results in blending of identities and the creation of a single succeeding firm. (Hicks, 2012, p 491). Mergers in the healthcare sector, particularly horizontal hospital mergers wherein two or more hospitals merge into a single corporation, are increasing both in frequency and importance. (Gaughan, 2002). This paper is an attempt to study the impact of the merger of two competing healthcare organization and will also attempt to propose appropriate

Merger motives that are questionable on economic grounds are diversification, purchase of assets below replacement cost, and control. Managers often state that diversification helps to stabilize a firm's earnings and reduces total risk, hence benefits shareholders. Stabilization of earnings is certainly beneficial to a firm's employees, suppliers, customers, and managers. However, if a stock investor is concerned about earnings variability, he or she can diversify more easily than the firm can. Why should Firm A and Firm B merge to stabilize earnings when stockholders can merely purchase both stocks and accomplish the same thing? Further, we know that well-diversified shareholders are more concerned with a stock's market risk than with its total risk, and higher earnings instability does not necessarily translate into higher market risk.

Theoretically it is assumed that mergers improve the performance of the acquiring firm due to

AN example, in 2008, Hewlett Packet purchased Electronic Data Systems to enhance the services aspect of the partnering technology offerings (Yurko, 1996). Marketing networks now give companies much wider customer access including overnight services. One such merger is the Takeda Pharmaceutical Inc. Although distribution chains work great to increase the bottom line, these mergers are not well received by federal agencies like the Federal Trade Commission. The concern being monopolization which is when one company controls too much of a given industry. Another driver of mergers is a desire for a leadership change. Sometimes the owner of the high technology firms simply wants to sale out and has problems finding a successor within to take the helm. Hence, a merger holds an

A strength from performing a merger is the ability to acquire a company’s unused debt. “Some firms simply do not exhaust their debt capacity. If a firm with unused debt capacity is acquired, the new management can then increase debt financing, and reap the tax benefits associated with the increased leverage” (Keown, 2005, pp. 23-4). Another strength is enabling Baderman Island to remove an ineffective management strategy or team. Baderman Island has the option to decide who stays with the merged company, and who is out the door. Often times, a weak management leading team is the problem the organization has not evaluated for its mediocre success. “The merger of two firms can result in an increase in market or monopoly power. Although this can result in increased wealth, it may also be illegal. The Clayton Act, as amended by the Celler-Kefauver Amendment of 1950, makes any merger illegal that results in a monopoly or substantially reduces competition. The Justice Department and the Federal Trade Commission monitor all mergers to ensure that they do not result in a reduction of competition” (Keown, 2005, pp. 23-4).

One major objective of mergers is to be able to reduce or fully eliminate the weaknesses that may exit in

Honeywell is a leading supplier of engine starters (upstream) where its inputs are necessary for the production of engines that GE (downstream) produces. GE’s CEO, Jack Welch strongly believed the

FTC employed structural, documentary, statistical, econometrics and financial evidence to verify that the proposed merger of Staples and Office Depot will lead to increase in market concentration, market prices and stock prices, and thus support FTC’s contention that this merger will cause an anticompetitive effect on Office Superstore market. Staples and Office Depot made a plain and useless contradiction. Finally, the Court announced to agree with FTC, and granted a preliminary injunction on this merger. This paper mainly focuses on FTC’s evidence and analysis.

Mergers and acquisitions can be classified in terms of the direction of the growth. A horizontal merger/takeover is the combining of two firms in the same stage of production, for example Well come Pharmaceuticals merged with Glaxo Pharmaceuticals. This sort of integration takes place to combat competition from the market and secure market domination; to reduce risks and increase financial strength; and to compete in

The General Electric (GE) and Honeywell International (HI) case illustrates the complexities of structuring mergers and acquisitions when the combined firms are capable of exerting market influence that threatens the competitive landscape. While General Electric's CEO, Jack Welch, characterized the deal as, "This is the cleanest deal you'll ever see," European anti-trust regulators were not so inclined to view the transaction as harmless to competition (Elliot, 2001).