Is there a need to regulate mergers? Explain.

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Is there a need to regulate mergers? Explain.

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Is there a need to regulate mergers? Explain.

Explanation & AnswerSolution by a verified expert

Explanation

There is a need to regulate mergers due to the following reasons-

To protect consumers from higher prices that are the result of the merger that reduced the competition.
To protect the target company's shareholders from the management of the acquiring company during hostile takeovers. This is because the raiders sometimes do not provide sufficient information regarding the valuation of shares to be received in exchange for handing in their shares.
To protect the interests of stakeholders such as employees. This is because the acquiring company may not honor their existing contracts.

To protect the target company's shareholders from their managers. This is because some provisions like poison pills, golden parachutes may benefit the target company's management at the expense of the shareholders.

Verified Answer

Mergers should be regulated due to the following reasons-

To protect consumers from higher prices that are the result of mergers that reduced the competition.
To protect the target company's shareholders from the management of the acquiring company.
To protect the interests of stakeholders such as employees.
To protect the target company's shareholders from their own managers.

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