Pros and Cons of Merging and Acquisitions
Dr. Okpala
HSCI 460
TR 12-1:50
When looking at mergers and acquisitions in the healthcare sector; where healthcare
industries come together, there are a lot of issues that must be taken into consideration to ensure
that the benefits outweighs the costs. One of the significant ways to look at it is on a case by case
basis and our study for this paper is designed to specifically provide and communicate the different
possible benefits and costs that are most likely the Pros and Cons of a merger and acquisition in
relation to the healthcare industry. A merger is when two companies combine together forming
one company, say for example; Kaiser Permanente Hospital and Loma Linda University Medical
Center and an acquisition is when one company buys another company and takes over.
This paper will take a detailed look at some of the Pros of a merger in the healthcare sector
to include, but not limited to the following: more added value to the combined entity than either
individual company can produce on its own, opens up new market for both companies, cost-
effective method to fuel expansion, creation of multiple growth. Moreover, the cons of a merger
in the healthcare sector may include, but not limited to the following: higher prices- may increase
the amount of debt owed, less choice, job losses- creates distress among employees, differences in
corporate culture that are not easy to consolidate, decision is not made by one person most of the
time, and diseconomy of scale.
Companies have the opportunity to consider mergers and acquisitions as a way to gain
growth for their own company. There are many pros and benefits for companies that decide to
either merge or purchase a different company. One of the pros that a company can gain is the
market power. A company can benefit and gain market power by the fact that the new company
is eliminating the competition by purchasing the competitors. The article “Advances in Mergers
and Acquisitions” share the following, “An acquisition will quickly build market presence for
your company, increasing market share while reducing the competitions’ stronghold” (Blonigen).
Either one of the transactions, merging or acquisition, will secure the eliminations of some
competitors. By merging, two companies are joining to work together and against other
competitors. Therefore, the primary company is eliminating one competitor by joining with
them. As for an acquisition, one company is purchasing another and eliminating that
competition. Companies are also gaining market power because of the new services and products
that it can start offering. Merging or purchasing can introduce a company to many new services
or products in the market that can lead to more attraction from the customers.
The financial gain is also a benefit when a company decides to merge with another or an
acquisition. There are many different factors when a company decides either one. The first factor
would be that a company would financially gain access and ownership of many assets and
resources. Therefore, the company can use other machines and resources that were not theirs
before. By having this new machinery, the company can increase their production for sales.
Moreover, companies can also financially gain by reducing their operating costs. When merging,
both companies can divide the operating expenses and that would help them financially gain.
When a company purchases another, the company is purchasing with clients, materials, ideas,
employees, and resources. Therefore, they are reducing their operating cost for a long term.
When considering merging, the companies can move together to one locations and share the rent
or mortgage cost. There are so many factors that can be included in the financial gain of a
company when merging or purchasing another company.
A company can increase their revenue when they decide to merge or buy a different
company. There are many different ways to increase their revenue. When purchasing or merging,
a company can get many new clients. The clients that the company is getting are the ones that
previously bought the services or products from the other companies. When a company gets
many new clients, the company wills also gets more sales. All of the sales that the company will
make will increase their revenue. Another way to increased revenue is by obtaining ideas for
products or services to offer. When merging or purchasing, a company will be introduced to
many services and products that other companies sold and that could increase the sales of the
company. Canfield School of Management shares, “A target business may be able to offer you
products or services which you can sell through your own distribution channels” (Benefits of
Merger and Acquisition). Overall, the company will increase its revenue if they decide to merge
or purchase a different company by making more sales than previously, especially if the
operating cost decrease.
Acquisition may also benefit a business through new resources. Prior to the acquisition,
the business has its own resources that help to generate revenue. The acquisition will add to the
