Atos Consulting Look Out | Consolidation of Industry

Concept

Industry Consolidation refers to the mergers or acquisitions of many
smaller companies into much larger ones within specific sectors. An
acquisition, also known as a takeover, is the buying of one company
(the ‘target’) by another.
A merger is similar, with two companies coming together, but with equal
status. Such actions are commonly voluntary and involve stock swap or
cash payment to the target.

Trajectory

Economies of scale: reducing duplication of departments or operations,
thus lowering cost.
Increased revenue / market share: absorbing a major competitor
increases power to set prices.
Cross-selling: for example, a bank buying a s • tock broker could then sell
its banking products to the stock broker’s customers.
Synergy: better use of complementary resources.
Geographical or other diversification: to smooth earnings results, which
over the long-term smoothes the stock price of an organization.
Resource transfer: value can be created through combining
scarce resources.
Vertical integration: companies acquire part of a supply chain and
benefit from the resources.
The near collapse of the financial system and the ensuing economic
downturn could accelerate this process. This is apparent in the
financial sector and could take place in other sectors as the economic
downturn progresses.

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