Large and powerful businesses don’t always develop in a linear fashion from a single origin. Mergers and acquisitions are ways for successful businesses to become even bigger and more profitable that can drastically change the original culture or structure of the company.
Acquiring an existing business or a competitor can increase your market share and give you the resources and talent you need to expand your business further. Unfortunately, mergers and acquisitions open businesses up to many legal complications.
There are risks involved with any downsizing that you might perform. There is also the possibility that the government might intervene to stop your merger from taking place. When might the government interfere in a planned merger or acquisition?
When there are concerns of a future monopoly
Acquiring another business can decrease the pool of competition and potentially give the resulting company too much control over the market. Even if several other providers offer a similar service, you could still face a challenge to your merger if the authorities suspect it could lead to a future monopoly.
Your current and likely future growth only needs to potentially affect competition or pave the way for a monopoly for federal enforcement agencies to intervene in your merger or acquisition. They don’t need proof that this transaction will directly lead to unfavorable industry outcomes or a monopoly. They only need credible evidence that it may lead to those unfavorable market outcomes.
Carefully documenting the steps you take during a merger to avoid monopolization can help you fight back against challenges brought by regulatory agencies related to your business plans.