The industry is consolidating through mergers and acquisitions
Symptom: The industry is consolidating around a few large competitors as these competitors acquire other industry players.
Implications for the market:
Acquisitions increase margin pressure on the industry. When two companies consolidate their operations, the cost structure of the resulting company goes down because overhead is reduced. This larger merged firm can then use its lower cost structure either to initiate or to sustain lower prices. The result is intensified, rather than eased, industry margin pressure.
Mergers and acquisitions therefore put pressure on those who do not participate but offer opportunities to those who do participate in an effective manner. The key to a successful acquisition is usually customer retention rather than the purchase price of the acquisition.
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Perspectives: Conclusions we have reached as a result of our long-term study and observations.