Industrial Economics: Mergers
By merging ExxonMobil was able to ensure stronger presence in different regions and benefit from synergies arising from cost savings, reduction in capacity and shared technologies. Exxon and Mobil were able to integrate and work together as a single entity to achieve common goal while Daimler and Chrysler failed to integrate and benefit from potential synergies.
Recently mergers have become increasingly popular. Lypczynski et al. (2013) suggest that globalisation has played a large role in it. With growing international markets and easier access due to tariff reductions, as well as because of advances in information and telecommunication systems companies face incentives to exploit possible benefits of mergers which are identified above. In real life companies are concerned not only with profit-maximization but also efficiency and internal organization of firm, allowing for unprofitable mergers. Firms should merge in presence of synergies to improve welfare (not necessarily consumer welfare) (Church and Ware, 2000), however potential synergies may not be achievable in real-life due to other factors, including cultural differences which was the case for Daimler/Chrysler. On the other hand, ExxonMobil example illustrated how merger can be successful and profitable. To sum up, it is worth to note that whilst horizontal mergers are easiest to implement (at least in theory) there is a reason why competition authorities are alerted by particular mergers the most. While companies subject to merger are concerned with own wellbeing, it is not necessarily aligned with consumer or much less rival interests.
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