Introduction
Merger is a situation where two firms agree to unite and become one company in order to produce one product. On the other hand, acquisition of a company refers to the situation where one company buys another company and takes full control of its operations. There are many reasons behind the existence of mergers and acquisition. Some of the reasons include expanding the market of the products, to reduce the level of competition in the market and reduce the cost of production and maximization of the profits. In America, mergers and acquisition has resulted to unemployment, low competition, monopolies, difficulty in the management of firms and effects on the shareholders. This paper discusses the possible effects of mergers and acquisition in America.
Effects of mergers and acquisition of firms
Low level of competition
The level of competition among the firms has tremendously reduced in America due to merging and acquisition of firms. When firms merge and become one industry, they take full control of the production of goods and services (Growing a Business: Mergers and Acquisitions par. 5). As a result, no other firm produces the same product that would compete with their products in the market. The effect of low level of competition in America is that the goods and services produced have been of low quality since the companies do not face any competition from any other industry. Examples of industries that have merged in America are American Airlines and US Airways (Iskandarani par. 2). The merging of these industries in the country has raised many hiccups because the citizens feel that there will be high cost of travelling. For instance, T-Mobile Company has rolled new calling rates to affect this merge in America. The citizens are pushing for the existence of three-mega airlines in the country to increase the level of completion. For this reason, merging and acquisition of industries has affected the economy of US.
Unemployment
Unemployment is another challenge that is affecting US due to the merging and acquisition of firms. When the industries merge, there are possibilities that employees would lose their job positions. The merged or acquired industries have changed the management of the firms hence displacing the original employees in the company (Iskandarani par. 8). The layoff of the employees has risen because of the changes that the merged or acquired company has undergone. For instance, changes in the production process, use of technology and the changes in the level of output are some of the changes that have increased the chances of retrenchments in the industries. The merging of American Airlines and US Airways has caused many people to be jobless. The two companies have changed their mode of operations that can only accommodate few employees. The increased number of unemployed citizens has reduced the level of revenue collection in the country hence affecting the economic growth of America.
Poor management of companies
Merging and acquisition of industries in America has posed a major challenge in the management of companies that leads to their poor performance. This is due to the differences in the management cultures of the companies. The two companies may have different management techniques that may not match with each other. For instance, a company may have its own way of evaluating the performance of the workers in the firm. If the other company has another way of evaluating the performance of the employees, the management of the company will be in turmoil. For example, the management of American Airline and US Airways has been difficult due to their management differences (Mergers & Acquisitions: How they May Impact You par. 9). Therefore, merging of companies has led the collapse of companies in the country.
Conclusion
In conclusion, merging and acquisition of firms in a country may affect the economy of the country. Despite having various advantages, merging of industries has negative effects like unemployment in the country, low level of competition and poor management of companies in the country. In America, the merging of two firms namely American Airline and US Airways has caused such challenges in the country. Therefore, a country should put conditions to control the merging and acquisition of firms.
Works Cited
Growing a Business: Mergers and Acquisitions. 2014. Web.
Iskandarani, Mariam. Post-acquisition performance of cross-border mergers and acquisitions and the moderating effects of entrepreneurial orientation and its dimensions. 2010. Web.
Mergers & Acquisitions: How they May Impact You. 2014. Web.