MERGERS AND THE BIBLICAL VIEW 6
Mergersand the Biblical View
Mergersand acquisitions take place where two businesses combine into oneorganization, for mergers or one business takes over another businessto form one large entity in the case of acquisitions. From an ethicalpoint of view, mergers and acquisitions are good for businessoperations within the beneficiary businesses. However, for theindustry of the two businesses, mergers and acquisitions may presentethical concerns, especially where the merger significantly affectsthe competitive environment by extreme market dominance associatedwith monopolies (DePamphilis,2010).This makes mergers and acquisitions a business strategy with bothbusiness outcomes and ethical concerns. Therefore, a business shouldconsider the strategic advantages a merger or an acquisition willhave, and balance the same with possible ethical concerns. This makesmergers and acquisitions a strategy that requires not only theconsent of the two businesses involved, but an assessment of theimpact of the strategy to the market.
Oneof the reasons why mergers still take place despite their perceiveddisadvantages is Another reason for mergers is the need for marketdominance, especially in a continually competitive businessenvironment (Weber,2013).Many businesses are continually seeking to venture into largerbusiness ventures with larger markets than they can do not have doneas single entities. Market expansion may not lead to market dominanceand expansion due to the absence of a corresponding market take over(DePamphilis,2010).This means that a company may expand the market on its own, butcannot sustain the expansion through market dominance. This isbecause a single firm cannot handle more production or marketefficiency.
Despitethe principal-agentproblems and managerial difficulties,mergers are preferred because they provide synergy and economies ofscale that accompany a big business. Among the advantages of synergyinclude reduced costs of buying, better human resource, increasedsales and profits as well as business development like advertising(DePamphilis,2010).Regardless of the disadvantages of diluted management, mergersprovide the newly formed business with large pools of resources tocontrol and implement strategies for increased business. Otheradvantages of a merged business relate to reduced competition andreduced competition that existed when the businesses were competing.This brings an ethical advantage to the two businesses despite havingissues with other competitors since they enjoy an upper hand in themarket.
Anotherreason for mergers is because of the need for business capitalexpansion. Through mergers businesses expand their capital andventure into larger business ventures they could not have done assingle entities (Weber,2013).Capital expansion is one of the most difficult expansion strategiesof a company, especially in a financially competitive environment.The strategy is however complex since it is an expansion strategythat need to be adopted by compatible firms (Weber,2013).The option of mergers is made appropriate when a firm is faced withlimited financing options, especially or is highly geared, and needsto venture into capital intensive business.
“Dishonestmoney dwindles away, but whoever gathers money little by littlemakes it grow.” (Proverbs 13:11 NIV).
Mergersand acquisitions should be done in a way that promotes the gatheringof money through honest ways. As the verse states, gathering of moneylittle by little makes it grow, mostly through the exponential powerof business or discounting advantage. In this case, we would take the“little” to mean anything that is not financially strong, whichcan mean a small business. Therefore, in the case of mergers, “littleby little” would mean small businesses and gathering would take thecontext of the unity that drives businesses to come together.However, this verse takes a significant ethical consideration bygiving a warning that dishonest money will dwindle away (Proverbs13:11 NIV). This clearly presents an objective for any merger, whichit should be done for honest reasons.
Thisverse is the main argument that shows the biblical support for a wellimplemented and fair merger or business acquisition. The businessmerger presents a power, a power that comes along with the force ofleverage. In financial terms, businesses merge to leverage theirresources, expertise and strategies in order to reap the businessadvantages that come along with the economies of scale. However,leverage is a force that can be used for ethical reasons or forunethical reason. This exists where businesses engage in mergers andacquisitions as a way of dwindling money by dominating the market andkicking other businesses out of operation through monopolisticadvantages.
Whena business strategy such as a merger or an acquisition is donehonestly, it will be geared towards diligence. According to proverbs
“Theplans of the diligent lead to profit as surely as haste leads topoverty” (Proverbs 21:5 NIV)
Thisverse affirms that any business strategy is good and has moralauthority if it is done honestly. Through honesty, processes ofbusiness growth will lead to profit and will lead to increasedproduction and expansion. However, haste, which is normallyassociated with a shorter way of gaining wealth, can be summed up tobe done in dishonest ways. This will lead to dwindling away of theperpetrator, just as the previous verse warned.
Froma biblical perspective, the element of mergers is effective forbusiness operations and for the merging firms if it promotes honesty.The business merger or acquisition is good for business if it passesthe ethical test in several ways. First, the strategic process ofmerging or acquiring another company should promote better businesspractices. If a business process of merging does not lead to betterbusiness practices by the people in the organization, the bible isagainst the process. The business practices of people in the twoorganizations should be made more ethical and fair than it wasbefore, in terms of treating others and other business entities.However, it is the motive result of the merger that will justify theprocess of the merger or acquisition in terms of business practices.
Secondly,the business the business merger or acquisition should be alignedtowards strengthening of the operations of the businesses that mergeand their employees. This will be achieved if the joining together ofthe two businesses will be done in an honest manner.
“Theirhands will get too weak for the work, and it will not becompleted.” But I prayed, “Now strengthen my hands”(Nehemiah 6:9 NIV).
Businesscombinations are a way of strengthening each other to achieve more.As stated by Nehemiah, the strengthening of the hands is not justlimited to an individual, but also to the strengthening oforganizations such as a business. Therefore, business mergers aregood for business and are ethical if done with a purpose ofstrengthening and implemented honestly.
DePamphilis,D. (2010). Mergersand Acquisitions Basics: All You Need To Know.Waltham, MA: Academic Press
Weber,Y. (2013). Handbookof Research on Mergers and Acquisitions.Boston:EdwardElgar