Business Consolidation

Like a Pac-Man video game, a business consolidation involves the merger or acquisition of two or more small companies into a larger one. It can also refer to merging divisions within the same company.

The benefits of having the, uh...urge to merge...are that you may not need as many employees in purchasing, human resources, accounting, or other administrative functions.

Another advantage is that the new company might be able to obtain less expensive loans, since it now has more assets to put up as collateral. They will also now have a larger customer base, better geographic coverage, and perhaps lower prices from suppliers. Or...the acquiring company could just liquidate the assets of the company they are buying in order to eliminate a competitor, such as the big oil companies buying up solar power companies.

During the 1980s, major acquisitions seemed to happen on an almost daily basis, when investment banking companies would use the cash from the company they were buying in order to make the purchase, known as a leveraged buyout.