We will now survey different nations to have a feel of mergers and acquisitions taking place globally.
We will now survey different nations to have a feel
of mergers and acquisitions taking place globally.
The US government promotes free competition.
However M & A result in monopolistic situations where barriers are created
for entry of small firms. The Sherman Anti Trust Act of 1890 restricts building
beyond a market share of 75%. US law prohibits horizontal mergers. In the US
75% of the M&As are failure while in UK 8 out of 9 is failures. In US
M&As resulted in legal battles. Huge legal costs and waste of time are
Adopted from US and revised in 1977, the Japanese
policy allows break up of powers to companies with a large market share.
However, the extent of litigation is low.
Market domination is restricted in Rome at 40%, in
UK at 25% and in West Germany at 33%. The Federal cartel office may divorce a
merger after one year in West Germany. Tax levies on premium values above books
values are there. In UK the Monopolies & Mergers Commission tends to delay
and restrict creation of monopolies. The Restrictive Trade Practices Act of
1956 & Company Fair Trading Act of 1975 and Consolidating Act of 1975
control the power of concentrated private companies. In 1978, it was reviewed
that concentration is required for international trade in UK
In France, Control of merger started in 1977.
Mergers (horizontal) causing market share of 40% and mergers with companies of
a market share of over 25% are allowed when advantages out weigh disadvantages.
Take over bids are to be submitted to bankers, chamber syndicates and stock
brokers appointed by the ministry of economy. The proposals should be published
in newspapers and must undergo extended legal formalities. The share holders
should be informed and the stock movements regulated.
The companies Act brought the system misused by
British to an end in 1956. The Government also controls the number and
remuneration of Board of Directors. The companies are restricted in loans given
to other companies to avoid interlocking of funds.
The MRTP Act of 1970 and FERA of 1973 impose
control in the conduct of companies. MRTP act restricts concentration of
economic power and encourages free trade. The asset limit for MRTP firms is
raised to Rs.1000 million.
FERA gives guidelines for foreign business in
India. Permissible foreign shareholding is 74% and in other manufacturing items’
like construction, consultancy & non tea plantation the limit is 40%.
Tags : Strategic Management - Strategy Formulation
Last 30 days 640 views