Wednesday, June 3, 2009

On Bigness

Does Larger size mean being more competetive. I was reading Bank Mergers an article that talks about the Formation of Super Banks and the resultant concentration of Risk - when the above thought occurred.

A line that stands out in the post is - " why it is in the country’s interest that 65% of the depository assets are held by only a handful of banks " . You can name these Banks - CITI , BOA , Wachovia ... handful and all have to be bailed out by the US govt.

These giant Banks did not all grow organically - their Giant size is the result of multiple M&A's along the way.

There seems to be a pattern here - You grow a bit too fast taking advantage of the overall favourable climate and then you are too huge to manage to be able to respond to the environment.

My question is does this apply to other industries. In so many cases we come across firms buying out the competition or merging in name of building efficiencies and economies of scale.How do these Mergers Pan out.

Are there instances where in companies have merged to form resulting firms that became even more competitive. Perhaps there are such instances - but a nagging thought remains - can large organizations retain their efficiencies by mixing diverse Corporate Cultures.Not just cultures it would be different ways of doing things, different procedures , different mindsets.

Buyouts are different - there one company just rides roughshod over the other.

But, in a coming together of equals - which till some while ago would have been at each others throats -can they become one and still retain the competence.

No comments: