Two firms can generate higher sales combined than they do individually
Shareholder Value
Mergers may destroy shareholder value as the costs of the M&A may exceed the profits
Monopsony Power
When a single buyer dominates the market e.g. the NHS monopsony power allows firms to control their costs
Reasons to Grow
-Monopsony power
-Increased security as a large firm
-Competitive advantage
-Meet objectives
-Respond to technological, political, legal or consumer changes
-Internal forces e.g. employee pressure, owners' pressure
Stakeholder
Anyone with an interest in the actions of a business
Divorce of Ownership of Control
Those who own the firm are often not the same people who control the business daily e.g. managers and owners
Principal-Agent Problem
An asymmetric information problem that stems from a divorce between ownership and control
Moral Hazard
Individuals are more willing to take risks as the failure will impact the owner more than the individual this can be hidden by exploiting the information asymmetry e.g. subprime mortgages
