Mergers in business

 Mergers & Acquisitions Pictures, Images and Photos

Yesterday was a big day in business news. It started with an announcement that the London Stock Exchange is merging (really acquiring) the owners of the Toronto Stock Exchange. This will create the fourth largest exchange in the world. It was very big news, but it was short lived. Only a few short hours after that announcement came reports that Deutsche Boerse are in advanced talks to merge with NYSE Euronext. This news was much bigger and overshadowed the merger announcement earlier that day.

These mergers are occurring because of start-up electronic companies that are taking away market share from the old players in the industry. However, mergers in business often happen as trends within industries. It is quite common to see multiple mergers within the same industry within a short period of time. There are several reasons for this and one of them includes simply looking to match or exceed what a competitor did. It is not as mindless as it sounds though. If your main competitor just acquired a smaller competitor, then that company now has an advantage over you. Over night that company grows substantially and now your company needs to do something to be able remain competitive. Often times that means acquiring a competitor of your own.

In general, it is a good sign for the economy that we are starting to see some mergers and acquisitions occurring now. There haven’t been too many of them since the recession in 2008 hit the world. Mergers are often a sign that business is optimistic about the future and even the present. It also creates business because although mergers can sometimes result in job cuts for the new unified company, it also generates business for other companies. This includes new marketing contracts, business opportunities, large equipment purchases and many other possibilities.

I suspect that we are not finished with the mergers from this industry and I would also not be surprised if this begins an overall merger trend that will spread to other industries. Perhaps there are some investment opportunities with this in mind.