Tuesday, May 22, 2012

Why Mergers Come in Waves

A rare, good article from the Economist:

Once one merger occurs, copycat transactions in the same industry become more likely. The first deal removes a competitor, potentially raising the profitability of all firms and making other targets look attractive to acquisitive bosses. More pessimistic firms observe the creation of a bigger rival, able to exploit economies of scale, and seek defensive unions. The sensible strategic response to one deal may therefore be another.
Positive feedback loops!

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