Where’s all the competition?
For those of us interested in taking the high road, mergers and acquisitions are very seldom the way to go
Have you been watching all the mergers and acquisitions over the last few years? How can we allow Pfizer and Allergan to join forces? Or Shell and BG Group? Or Dow Chemical and DuPont? Or Heinz and Kraft Foods? Or Anthem and Cigna?
On the last one, we don’t have a lot of health insurance choices here in New Hampshire. Now we’ll have even fewer.
The latest darling is Tyco and Johnson Controls, and this one is called an inversion, which includes moving JC’s headquarters offshore, in this case to Ireland, to reduce their exposure to our obscene tax burden. And their publicity on this claims the move is good for Wisconsin and the U.S.
In fact, I’ll bet if you think over your merger experiences, you’ll admit they’re all bad news. When your bank gets acquired, does service get any better? Do you suddenly feel less important than you used to? These bigger organizations have so many more customers they kind of make us feel that you and I are expendable. The only problem with that is we often don’t have a lot of choice.
Do you fly frequently? Have you ever found that these airline mergers are a good thing? Where you are going often determines the airline you have to fly. There may be alternatives, but these are almost always extremely less convenient. If you’re flying Boston to L.A., there are plenty of choices. If you’re flying Boston to Winnipeg, you’ll find little competition, and the price can be exorbitant.
If mergers and acquisitions are so bad for consumers, why are companies so interested in doing them? If you buy your competition, you don’t have to compete with them anymore. You don’t have to keep trying to beat them. You can take it easy. You then have “redundant” employees and lay off the ones you feel you no longer need.
It’s thought to be a shareholders’ dream, but if you look at stock prices over time after such mergers, you see the stock hasn’t quite soared the way it was supposed to.
Remember Digital Equipment Corp.? It was once the largest employer in Massachusetts and New Hampshire. It got swallowed by Compaq, which in turn got swallowed by Hewlett Packard. HP recently split the company, trying to survive. And of course their results are by no means unusual.
I’m not going to ask you to call your congressman. We don’t need more legislation; we have plenty already. We have the Sherman Act, passed in 1890. That wasn’t enough, so in 1914, we passed the Clayton Act and the Federal Trade Commission Act. The latter created the FTC as a watchdog to protect us from predatory capitalism.
Perhaps the most famous breakup was of John D. Rockefeller’s Standard Oil Company. Although there were some very small competitors, Standard Oil was considered a practical monopoly, so they broke it up into smaller companies that would have to compete against each other.
Interestingly, we’ve now allowed mergers like Exxon Mobil, Shell and BG Group, and others. Why are these mergers OK now when they were seen to be so detrimental years ago? What has changed?
For those of us interested in taking the high road, mergers and acquisitions are very seldom the way to go. Instead of buying your competition or being bought by them, beat them. Get better and better at what you do. Customers will notice. There’s a special satisfaction in being chosen because you’re the best instead of being chosen because you’re the only viable alternative.
Competition is the lifeblood of capitalism. It’s what gets us better and better products and services at continually lower prices. For instance, the computer industry is intensely competitive. This is what got us laptops, iPhones and iPads. It’s great that Samsung and others continually challenge Apple.
Compete and win! It’s a lot more fun than just following the herd. Sometimes you lose, but that makes you try even harder, and that’s how we get better and better.
Ronald J. Bourque, a consultant and speaker from Windham, has had engagements throughout the United States, Europe and Asia. He can be reached at 603-898-1871 or RonBourque3@gmail.com.