4.2.4 Reasons for mergers and joint ventures

Merger

When two businesses become one PERMANENTLY

Takeover

When two businesses TEMPORARILY collaborate to achieve a joint goal.

Competition markets authority (CMA)

They ensure businesses compete fairly, and don’t become too large.

Intellectual property and patents

IP is a product or invention a person owns, a patent is a legal document that stops others from stealing IP.

Reasons for mergers and takeovers: spreading risk

Countries can be at different stages of the business cycle. If one country is in a recession, the others can help maintain revenue. Prevents insolvency - running out of cash, almost bankrupt.

Reasons for mergers and takeovers: entering new markets and trade blocs

Trade blocks can give access to a larger market and access to more customers.

Reasons for mergers and takeovers: acquiring brands and patents

A business may look to merge in order to acquire a lucrative brand name.

Reasons for mergers and takeovers: securing resources or supplies

Firms may integrate with businesses that supply them - called backwards vertical integration. Resources may be scarce, it may also be so that they have greater control over quantity of resources supplied.

Reasons for mergers and takeovers: maintaining competitiveness

It can reduce competition. It can create barriers to entry. They can share knowledge/technology.