Mergers and Takeover Investigation

Mergers and Takeover Investigation
I will be investigating the merger of Carlton and Granada; the new company is now called itv. A merger occurs when two business organisations, roughly the same size, recognise the mutual benefits that could be gained by joining together. So the TV companies Carlton and Granada would gain a variety of benefits by merging. Some of the reasons for merging may be: -To reduce fixed costs ? by merging Carlton and Granada will save money. For example, the new company will only need one head office. Currently they will have one each. So when they merge the new entity will be able to sell off the head office buildings. - Increased market share ? this makes the newly formed company much more powerful in the market place ? it strengthens its negotiating position with companies that wish to undertake TV advertising.
Economies of scale can be gained by the newly formed company ? e.g. reduced interest charges when borrowing money from the banks etc. These 2 companies wanted to merge because itv has been losing market share to other channels, particularly cable and satellite stations. And its financial position was further weakened by the collapse of its itv Digital venture last summer, with huge losses. A merger could harness the power of the network, which still garners 50% of all advertising revenue. And the companies say they would save at least £50m a year by avoiding duplication. itv logo They were both very lucky as there were not many negative affects on either of the companies. The merger made them very successful. They reported a 57% rise in profits at the end of its first full year as a combined company. Although many people lost their jobs due to this merging. Granada ? which announced 175 redundancies at its Meridian subsidiary last week ? employs about 6,000 staff while Carlton has about 2,500. Trade unions have already called a ballot of Granada staff in protest at a pay offer. But the benefits of itv were not just on the companies but also on the viewers. The viewer got better programs, which was a big positive for them. The merger is intended to free up more money to plough into the schedules because better programmes bring in more viewers, which brings in more money from advertisers. For Granada and Carlton to get out of their financial rut, they must produce shows that are watched by a lot of people. If shows are popular, advertisers are more willing to let go of their cash. It also has a positive effect on the shareholders. On their last trading day on Friday, Granada shares gained 7.5p to 140.5p, while Carlton shares gained 14.25p to 281.5p. Charles Allen, itv chief executive I agree with the merger as it has a positive affect on most people if it is successful. itv is a well-known company who have ITV1, ITV2 and ITV3, and itv news channels. Their profits have increased and also the viewers have. But I do not agree that that many people should be made redundant and loose their jobs. This could cause problems like strikes for itv.

Mergers and Takeover Investigation 8.4 of 10 on the basis of 1121 Review.