Synergy, besides being one of those infamous “corporate buzzwords,” is the combination of at least two things (for example companies or organizations) to produce a financial benefit that’s greater than the sum of its parts.
For example, by purchasing one company, another company might be able to generate more revenue than both companies would have been able to generate if they kept operating separately. (Think Graham Crackers Inc. and Melty Marshmallows LLC being acquired by Hershey’s.)
(photo credit: banspy)
What happens when the two largest stock exchanges in the U.S. become one big mega-exchange? A monopoly, that’s what! In case you don’t remember from history or economics class (or the game Monopoly), a monopoly is when one company controls an entire market, making it hard or impossible for smaller companies to fairly compete. (The market, in this case, being the market of stock markets.)
That’s why anti-trust regulators at the Justice Department have shut down Nasdaq’s attempted hostile takeover of the New York Stock Exchange. The takeover is hostile because the NYSE already has a deal with German bank Deutsche Borse to be acquired for $10 billion, and it’s so not interested in starting a relationship with Nasdaq right now.
The New York Stock Exchange and Nasdaq have been competing for years, which keeps them both in customer-pleasing, price-cutting mode. Without that competition, NYSEasdaq could charge whatever it wanted and still crush what little competition would be left.
It could even become… too big to fail!
(credit: jarapet)
How a marriage of two stock exchanges illustrates the modern revolution in stock trading.
“The exchange business is really a computer business these days.” – Charles Jones, Professor at Columbia Business School, former visiting economist at the NYSE
Did you know that stock exchanges like the NYSE are themselves publicly-traded, for-profit companies?
How much does a name brand influence your decision to buy (or invest)?
Thinking about investing in stocks? Take our Risk Assessment Quiz to see how much equity you can handle.
They can probably find a better deal anyway.
“This is by no means the end of Chrysler’s bankruptcy case. So many issues still need to be resolved, which may take months or even years.” – Ed Neiger, Founder of Neiger LLP (a creditors’ rights and bankruptcy law firm)
A merger is the combining of two or more companies to become one. It’s basically when one company marries another company and decides to move in. They take the same name and put their money in a joint account (aka combine balance sheets).