Mergers and Acquisitions
Disney is buying Fox and CVS is buying Aetna and what does this all mean?! Why does one company decided to buy another? Most times one company will buy another because it makes the most sense for their business. A lot of times they believe that by combining two businesses they will do one of two things:
- Create Cost Efficiencies. Meaning that by combining the two they may be able to use the same machines or people and create the same product or more and that overall this will be cheaper
- Grow their business. A lot of times one company wants to grow to remain competitive and instead of creating their own new division of the company will just acquire one.
Obviously there are other reasons why companies may merge but these are some big reasons.
Why do you care? When two companies merge it can affect the economy. That is why the government will regulate it. They do not want a company to get too big and have the ability to "overcharge" for their products.
And THAT is your fun Finance fact of the day. What Mergers and Acquisitions have you heard about lately??