Merging Trends

Let’s suppose you’re the president of a successful high-tech company. You’ve worked hard and brought the firm to a new level of success. You charge lower prices and offer better products than you competitors. You constantly push the boundaries of the technology to bring the best bargain for your customers. You led the company to the heights of its success and want to bring to the next level.

To pull it off, you need capital and you need it cheap. You need a new customer base, one to build on. You need employees familiar with the new equipment and customers. There’s one way to get all of this in one fell swoop and that’s a merger.

It’s no wonder why mergers garner so much attention in the business world. And two major mergers are making headlines, but the content rarely alludes to the great new potential about to be unleashed. It’s the legal issues.

SBC Communications is looking to buy AT&T and China’s Lenovo Group has plans to buy IBM’s personal computer division. In both cases, the Justice Department will probably allow the merger to go through, but that doesn’t mean there’s no political lunacy in the stories.

Back in 1997, then-FCC Chairman Reed Hundt shut down any chance of a merger between the two companies by simply calling it “unthinkable.”

Today, three Republicans are wrongfully concerned that IBM capital and technology will move overseas to China and want the review process extended so defend-orientated government agencies can lend their views.

Mergers are wonderful business tools. When one company mergers with another, management can take the best of both and serve the economy even better than if both were working independently. Politicizing this process never yields benefits. At best, it slows down economic progress through mountains of paperwork and political misinformation. At worst, it flat out prevents businesses from providing more for the economy. Paradoxically, there’s more distrust of big business than the much, much larger Big Government. If only the Justice Department would break up themselves.