The Real Reason for Mergers And Acquisitions

Executive Summary

• Mergers and acquisitions are presented as gaining efficiency, but they are designed to consolidate markets, increase monopoly power, and control buyers in reality.

Introduction

The reality of mergers has next to nothing to do with the official explanations around mergers.

What Mergers Are Really Designed To Do

Mergers are not performed to “increase efficiency” as claimed by those who want regulator approval for mergers or by the Wall Street analysts that benefit from merger fees and repeat these claims to a credulous financial media. Instead, mergers are designed to concentrate economic power and to enable control over customers. They are anti-competitive and a way of capturing markets.

This is explained in the following quotation.

“Mergers tend to lead to layoffs, higher prices, less innovation and research, and a more brittle supply chain, and they amplify the control monopolies have over our society. There are even weird new ways of self-dealing via mergers, like the trend of private equity funds selling their own portfolio companies to themselves, and the new cheating special of 2021, the special-purpose acquisition companies, or SPAC.”

Source: Matt Stoller

https://mattstoller.substack.com/p/is-biden-accidentally-giving-the/

Why The Private Banking Industry Likes Mergers and Acquistions

It is challenging to find an investment bank analyst to write a negative response to mergers and acquisitions. One reason is private bankers make enormous fees from these activities. Secondly, a merger or acquisition will nearly always result in more monopoly power, which means higher unearned income and higher potential profits. This is the response of private banking interests even though mergers and acquisitions have a very negative history regarding operational effectiveness. If anything, mergers and acquisitions result in lower efficiency. However, the mistake is taking business or private banking interests at their word that their goal is efficiency. The goal is profit maximization.