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What are the biggest disadvantages of business combination?

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Business combination is a good option for a company which has to increase its market share and also provide competitive tendency in the market. But there are many disadvantages of business combination. There are some issues which can be faced after combining two companies.

Delayed decisions

A combination of companies can be a great way to get the best of both worlds. But when there is an overlap in management, it is important that the businesses are run as one cohesive entity.

If not, then decisions may be delayed, which can cause problems for your business as well as other stakeholders. Additionally, when you are a controlling shareholder, it will be difficult to decide on the best course of action.

If you are in a position of power and influence, you may find that your competitors will use this advantage to their own advantage. This can result in a delay in decision making, which could have serious consequences for your business.

Conflicts

The most common reason for a deal to fail is because of conflicts between the two companies. If they’re both big enough, they’ll find themselves at loggerheads over some issue or another.

The two companies may have different management styles, differing cultures, different values and goals, or any number of other issues that can cause problems for the combined business.

Lack of consumer choice

It’s not just the size of the market that makes this a problem; it’s also what kind of product each company sells and where their customers come from. The combined company may have too much overlap in its geographic footprint, or it may simply lack sufficient presence in certain areas (or customers).

Changes in operations

The way that one or both companies operate may change after they merge together so that they no longer operate as separate entities but instead operate as one entity under one roof or under the same roof as their competitors but with multiple brands operating under different names or logos (i.e., Pepsi/PepsiCo).

Changes like this can lead to difficulties when trying to make changes within the operation because it can be difficult to make changes quickly enough without causing disruption within operations while maintaining quality control standards at all times.

Unfair practices

When two companies combine together, they often have access to each other’s information and products. This may give them an unfair advantage over their competitors and lead to unfair practices such as price fixing or anti-competitive behaviour against other businesses.

The unfair practices can even trickle down to the inefficiencies in the smallest of business activities like maintaining accurate double entry bookkeeping by the accounting team. If there are other parties involved in the proposed acquisition or merger, they may try to muscle their way into the deal by offering additional terms that are advantageous for themselves but detrimental for others involved in the transaction.

For example, if one party is offering more money than another, then this could be an attempt to gain an unfair advantage over its competitors or even over its own shareholders.

 

 

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