Impact of M&A on Consumers
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While M&A could provide synergies, value add and reduce costs for customers, companies could also gain dominance and pricing power in the industry.
Will M&A benefit consumers in the long run?
It could benefit consumers if there are cost saving synergies that are passed on, but I doubt that rarely happens. Quality generally doesn’t go up in my experience. Case in point, I used to love Jameson mattresses. They were a family owned company that did very little advertising and instead chose to put their money into the quality of their product. They were bought out and the marketing factor went up exponentially – building on the reputation – but the quality plummeted once the mass manufacturing took over.
See for consumers benefit can be realized in following cases?
Are they able to get better products in affordable price?
Are they able to get better service and parts supply?
Are they able to get enriched brand perception due to strength of one brand?If answer is yes, then its definitely beneficial for the consumer, If answer is no then it’s not beneficial for the customers.
I think as far as the M&A doesn’t make the feeling of monopoly in the mind of consumers because of elimination of competitors by acquirer through M&A process and instead reduces costs and causes the availability of products in shorter way or easier process, M&A can help consumer
Merged companies accomplish price cuts by operating more efficiently, reducing redundancies in staffing and other areas and streamlining operations
Consumers can benefit from mergers and acquisitions when synergies are realized or improvements made that impact cost. Additionally, they can benefit if the product offering is expanded due to the deal.
It really depends on the company and market. Yes, on one hand consumer benefits when there are improvements to the products etc. But, this should not come at the expense of excessive pricing power on the firm.
So yes, using economics, in a “monopolistic competition” market structure, please, by all means, merge. But in a “duopoly” or “oligopoly” market structure, I would suggest to exercise some caution – The acquiring firm may be in too strong a position, if left under-regulated.
This depends on different factors. The company’s management might decide to keep prices low for customers, but if there is mounting cost pressure (due to suppliers or economic factors) they might look to pass on these increased costs to the customers.
Also, with increased dominance in the market (for instance through acquisitions resulting in improved efficiency), the company may be able to achieve higher economies of scale which can lead to them reducing the prices passed on to customers. However, this is at the discretion of the company’s management.
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