Friday, December 11, 2009

Motives behind Mergers

By Ka Lee Angel Lee

The Bing and Yahoo search engines merger has just completed. Both of them are popular and leading search engines, however, businesses today still believe the bigger the better concept and here is why.

Yahoo and Bing are horizontal integration. Bing can provide yahoo real time searching and thus provide the missing ingredients necessary for further success. Merging for the two can save resources that are complementary and thus save a lot of time in engineering or develop new search engineers by yahoo itself. Also there are economies of scale. Bing and Yahoo can spread fixed costs across a larger volume of output and thus achieve higher efficiency.

Though Google still owns 71.6% of the overall search market updated last month, the merging of Bing and Yahoo search engines will leave Microsoft far behind. This means mergers can help companies gain market shares.

Nevertheless, merging can help diverse risks as the two companies now shares resources and provide what each other needs, they may as well help each other’s financial needs like providing funds and paying back liabilities.

Though merger sounds beneficial, companies always think deep before taking action because if they do not choose the right partner, the benefits mentioned above cannot be achieve and costs will then go up for training and management.

Sources 1 2 3

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