Chapter 14- Mergers and Acquisitions

This chapter deals with the mechanics involved in mergers and acquisitions. Mergers and acquisitions is a way for companies to expand and diversify as a method to increase revenues, reduce cost, and resulting in higher profits. According to the FTC, there are five categories of mergers and acquisitions and they are as follows.

·       Vertical merger- acquires either suppliers or additional customers

·       Horizontal merger- acquires former competitor

·       Product extension merger- acquires complementary products

·       Market extension merger- acquire new geographic markets

·       Conglomerate merger- all other types of acquisitions

Netflix has not been very active in mergers and acquisitions. They are more concerned about mergers and acquisitions that are happening between ISPs. They have lobbied against merging of Comcast and Time Warner Cable. Netflix believes that this is very close to a monopoly and they will be at the mercy of an ISP to charge whatever they want for Netflix’s bandwidth usage. Netflix requires very fast and consistent bandwidth for their service. Any disruption in speed can have consequences resulting in loss of subscribers.