What is the disadvantage of a large successful company taking over a weaker company?
Answer:
you inherit the weaker companies overhead and employees
sometimes people lose their jobs
"Weaker" companies are usually privately owned. If a larger company gobbles it up, then the revenue that company produces is taken out of the community. There are a plethera of disadvantages, but this is the major one.
The employees have to adjust to the new company's culture and working style.
Also, both companies may have different client base which can cause conflict. For instance, Citibank bought Cal Fed in california few yrs ago. The buyout helped Citibank to have more appearance in california area as Cal Fed had quite some branches back then. However, on the other hand, numerous of Cal Fed old customers closed out their accounts as they complained about the fees. In obvious, Citibank aimed to high-end clients, while Cal Fed aimed at lower-income public (just like Washington mutual). The old Cal Fed clients couldn't afford to pay for higher fees.
Moreover, as other said. Some employees need to go espeically those at higher positions. It's because there will have overlap at the same job functions. This, in turn, will lead to lower moral in the company.
In additions, the benefit packages will be different. Both companies may carry different insurance or 401k plan. After they combined, both companies will need to see how to adjust this. Anyway, this is only a small issue.
Besides, weaker company may carry debts. The larger company may have to pay for its debt. In actual, most of the larger company won't mind paying the debt. It is because the main purpose of buying out is either to elimate a potential competitor or streamline production/manufacturing process . that's why often stock market will rise becuase pubic belive the buyout will help the newly formed company to advance and grow.
-edited 12:52pm
I am making an assumption that the large successful company is buying a weaker company strictly because it is smaller and not necessarily poorly run.
The disadvantage of a "successful " and "larger"company taking over a weaker company is the loss of entrepreneurial spirit. Too often smaller "weaker"companies become caught up in the bureaucratic nightmares of a larger conglomerate. Smaller "weaker"companies are usually much more nimble and able to quickly react to market conditions and customer demands and this was very likely one of their niches. The bureaucracy created often leaves the high potential employees within the smaller company seeking employment elsewhere where they have more autonomy and are better recognized with a better potential for advancement. So the biggest disadvantage that I have seen is the loss of high caliber human resources that very likely made the smaller "weaker"company successful.
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