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Thursday, April 20, 2006

M&A: THE COMPETITION PERSPECTIVE

Mergers and acquisitions are a normal feature of a vibrant economy. Firms seek to grow by acquiring others with objectives such as improving efficiency and achieving economies of scale. Sometimes an enterprise facing closure (‘failing firm’) could avoid that fate by merging with a more efficient firm.
Recent well known mergers include, Exxon-Mobil (oil), Bell Altantic-NYNEX (telecom), Daimler-Chrysler (automobiles), Proctor & Gamble-Gillette, Boots Healthcare-Reckitt Benckiser, and Adidas-Reebok. As the Indian economy is becoming freer and more dynamic, the M&A scene in India, too, is hotting up.
Recent months have seen a spate of M&As, small and big, such as Birla-Larsen & Toubro (cement), United Breweries-Shaw Wallace (liquor), and, most recently, Jet-Sahara (aviation).
Some acquisitions have resulted from the government’s privatisation process, such as the acquisition of VSNL by Tatas, IPCL by Reliance, and CMC by Tata Consultancy Service. In banking, Global Trust Bank merged with Oriental Bank of Commerce, and Bank of Punjab with Centurion.
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