Question

Since the early 1980 s the size of companies acquired in mergers has been __________. (LO7) a) getting smaller b) staying about the same c) getting larger

Short answer

Since the early 1980s, the size of companies acquired in mergers has been getting larger (option c).

Step-by-step solution

Understand the options

First, let's discuss the three available options: a) Getting smaller: This means that the size of companies being merged has been decreasing since the early 1980s. b) Staying about the same: This means that the size of companies being merged has not changed significantly since the early 1980s. c) Getting larger: This means that the size of companies being merged has been increasing since the early 1980s.

Evaluate the options

To determine the correct option, we need to consider the available information on mergers and acquisitions since the early 1980s. We can look at the trend of how companies have grown through merging and acquiring other businesses.

Choose the correct option

Based on the analysis of mergers and acquisitions trends since the early 1980s, it has been observed that the size of companies involved in such deals has consistently been getting larger. Many companies have grown through mergers and acquisitions, resulting in larger corporations dominating various industries. Therefore, the correct option is (c) getting larger.

Key concepts

Corporate Mergers

Corporate mergers represent a significant aspect of the business landscape, where two or more companies combine to form a single entity. Mergers are often pursued to achieve various strategic objectives, such as expanding market reach, acquiring new technologies, or realizing cost synergies. A key characteristic of mergers is the mutual agreement between all parties involved. Unlike acquisitions, where one company usually takes control of another, a merger suggests a more equitable joining of forces.

When looking at historical trends, as indicated in the given exercise, we see that the size of companies involved in mergers has been growing. This increase is due to the desire for companies to improve competitiveness and to leverage economies of scale which allow for more efficient operations and can often result in improved profitability. Over the past decades, bigger mergers have become newsworthy due to their impact on markets, economies, and even regulations.

Business Acquisitions

Business acquisitions differ from mergers in that they involve one company taking ownership of another company. This can happen through the purchase of stock, assets, or other types of equity interests. Acquisitions serve as a means for companies to grow rapidly, enter new markets, or acquire valuable assets and human capital. The trend of larger businesses acquiring smaller ones has led to a more dynamic and sometimes volatile business environment.

One can understand business acquisitions as part of a broader corporate strategy that might encompass diversifying product lines, monopolizing a particular market sector, or simply eliminating competition. As the exercise suggests, with companies getting larger due to these transactions, there has been an upward trajectory in the scale of acquisitions. This trend aligns with the overall consolidation within industries and the push for global expansion by larger corporations.

Industry Consolidation

Industry consolidation is the process by which a market becomes dominated by fewer but larger companies. This can be a result of mergers, acquisitions, or organic growth of some firms that edge out smaller competitors. The benefits of consolidation for businesses often include increased market power and economies of scale, which can lead to lower production costs and enhanced competitiveness.

The trend toward industry consolidation has been particularly marked since the early 1980s, as supported by the solution to the exercise provided. By merging with or acquiring competitors, businesses have grown in size and power, leading to the concentration of market shares in the hands of fewer players. While consolidation can drive prices down for consumers due to increased efficiency, it also raises concerns about reduced competition and the potential for monopolistic practices, prompting regulatory bodies to closely monitor and sometimes intervene in large merger and acquisition deals.