From the course: Mergers & Acquisitions
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Consider market and competitive dynamics
From the course: Mergers & Acquisitions
Consider market and competitive dynamics
- If you acquire a company, the market will react. Some reactions will be a yawn. In other situations, it could result in a battle for customers and market positioning. Your acquisition could even result in lawsuits seeking to block your purchase on competitive grounds. If you're in a relatively concentrated industry, you might want to look into what's called the Herfindahl-Hirschman Index. That index looks at how concentrated a market is. Regulators tend to use this index to look at a possible acquisition and see if the market is getting too concentrated. The reason they do this is they want to make sure that no competitor has too much power and that buyers aren't disadvantaged. I worked for one client that was considering an acquisition in Europe. They looked at the players in that market and said, "If we go purchase this one player, how concentrated does the industry get?" It was right on the borderline of being too concentrated. We knew regulators were going to be involved in…
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