Assessing a merger: Main factors

Assessing whether an acquisition by Company A of Company B would maintain

competition in the market involves a multi-faceted analysis. Here are some key aspects
to consider:

Market Definition and Concentration:

• Relevant Product Market: Define the specific product or service market in which
both companies compete. This helps determine the potential impact on
consumer choice and pricing.
• Market Share: Calculate the combined market share post-acquisition. High
combined shares, particularly in an already concentrated market, raise concerns
about reduced competition.
• Barriers to Entry: Analyze the barriers to entry for new competitors in the market.
High barriers (e.g., patents, licenses, capital requirements) suggest limited
options for consumers if competition weakens.

Competitive Dynamics:

• Direct and Indirect Competition: Identify all other competitors in the market,
including direct rivals and potential substitutes. A strong presence of alternative
options can mitigate the impact of the acquisition.
• Innovation and Differentiation: Evaluate how the merged entity's capabilities and
resources might affect innovation and product differentiation. Reduced incentives
to innovate could harm consumers.
• Buyer and Supplier Power: Assess the bargaining power of buyers and suppliers
relative to the merged entity. Increased power could lead to higher prices for
consumers or unfair treatment of suppliers.

Efficiency Considerations:

• Cost Synergies: Analyze potential cost savings or operational efficiencies from

the acquisition. These can benefit consumers through lower prices or improved
product quality.
• Vertical Integration: Consider whether the acquisition creates vertical integration,
where the merged entity controls multiple stages of the production process. This
can be beneficial for efficiency but may also raise concerns about limiting
competition in specific segments.

Regulatory Landscape:
 • Antitrust Laws: Review relevant antitrust laws and regulations in the applicable
jurisdictions. Regulators may scrutinize the acquisition based on its potential to
harm competition and consumer welfare.
• Regulatory Reviews: Depending on the market size and companies involved, the
acquisition may be subject to regulatory review and approval processes.
Regulators may impose conditions to mitigate competition concerns.

Additional Considerations:

• Future Plans: Assess the long-term strategic plans of both companies. Do their
goals align with maintaining a competitive market?
• Employee Impact: Consider the potential impact of the acquisition on the
workforce, including job losses or changes in working conditions.