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Mergers and Acquisitions 1
Mergers and Acquisitions
A general overview in a Market Economy
Mergers and Acquisitions 2
Role of government in a Market Oriented Economy
The government intervention is important in any market economy so as to ensure
efficiency. Government Intervention ensures that the allocation of the resources is not only
Pareto optimal but is also more equitable. For this government needs to ensure that market agents
have equal access to all possible information. The government intervenes in the market by
providing public goods, changing the distribution of income in the society etc.
The government intervenes through taxation and subsidies in the market with
externalities so as to ensure Pareto optimal allocation of resources in the society. The
government is also the Provider of the Public goods in an economy such as roads,
idges etc.
The government engages through planned programs so as to take into account the unequal
distribution of income, unemployment, poverty and other social problems. So in this way
government promotes the wellbeing of the people of the society. So government Interventions
ensure that the allocation of resources is not only Pareto optimal but is also equitable in some
way.
Government intervention is important in the market economy so as to ensure the well-
functioning of the economy and also that the interest of the consumers, producers and the
community is protected. Since government intervene to provides those goods and services which
cannot be provided by the market. So government plays a very important role which is directed
to promote Pareto optimality
Mergers and Acquisitions 3

The way the market values the industry determines the mergers. So Merger agreements
etween organizations have been looked by the government as well as the stockholders. Mergers
and Acquisitions add to the monopoly power of the big players by building up of market share in
the hands of few players. Since the competitive forces lead to more desirable market equili
ium
so government has passed various laws to check mergers and acquisitions and these laws are
efe
ed to as the competition laws or antitrust laws. These laws are basically aimed at checking
any type of illegal cooperation’s through cartels or mergers or the formation of the monopolies
which has become the significant business strategy of big market players in the capital intensive
industries in recent times. An act was passed in 1993 which aims at pacifying the effect of forces
threatening healthy competition in the market and this act was Swedish Competition Act as it
ensures the healthy competition in the market.
Rationale behind Merger laws (MLs) in the U.S
Government regulation is needed in case of market economies like U.S where more
mergers and acquisitions take place than in any part of the world. These regulations...