Mergers, acquisitions, and joint ventures are all different ways for two or more firms to integrate or coordinate their operations:
- A merger is a structural fusion of two firms that results in a common ownership and management structure. Mergers usually happen through stock swaps.
- An acquisition is a type of merger in which a firm with more resources and greater market strength may acquire another firm. The acquiring firm usually uses some combination of stocks, debt, and cash to finance the transaction.
- A joint venture is a strategic alliance between two firms that share resources, equity, revenues, expenses, and management to pursue a common goal. Each firm usually retains its own corporate identity.
There are three types of mergers: horizontal, vertical, and conglomerate. Conglomerate mergers occur between firms operating in separate markets. As such they do not generally raise competition concerns and are not covered further in this section.
Mergers, acquisitions, and joint ventures are motivated by a range of factors such as cost savings from synergies between the firms or economies of scale and scope, efficiencies from vertical integration, or geographical diversification or cross-selling of products.
This section discusses common approaches to analyzing:
The Role of Competition Authorities and Regulators
Provisions governing mergers and acquisition are generally included in competition or antitrust laws, where these exist. In this case, investigation of proposed mergers is usually the responsibility of a competition authority.
Some countries with no competition law have included sector specific merger provisions in their telecommunications laws (for example Hong Kong).
In countries with both a competition authority and a telecommunications regulator, both agencies may have a mandate to investigate mergers in the telecommunications sector. For example, in the US the Federal Trade Commission and the Justice Department have a general responsibility to investigate potentially anti-competitive mergers. However, the Federal Communications Commission may also investigate horizontal mergers between telecommunications firms to determine whether or not the merger is “in the public interest”.