Corporate mergers may help or hurt consumers, say CEOs
This week’s question: Corporate mergers have been in the news lately with health insurers Anthem and Cigna joining forces. In general, do you think mergers in a given field help or hurt consumers overall?
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Depending on the field and on the number of competitive players, corporate mergers may create more or less competition. On healthcare specifically, I believe there are not that many large options with extended doctor networks to compare and compete, hence it would hurt consumers overall.
Daniel Ades, managing partner, Kawa Capital Management
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M&A’s are part of the cycle of business life. Companies merge to scale up and improve operations that should benefit customers. However, mergers sometimes result in reduced customer service quality/speed, but that only opens the door for start-up innovators to disrupt the big players and the cycle begins again.
Christine Barney, CEO, RBB Communications
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Corporate mergers have become common in today’s business environment and in many cases the mergers are beneficial for the consumer, allowing the company to provide their product with better value due to cost cutting. But in the case of health insurers merging, it has to hurt the consumer. It has allowed them to raise their premium prices due to less competition. There are fewer providers today than years ago and health insurance premiums have gone up tremendously.
Richard Behar, founder and CEO, Capitol Clothing Corp.
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I think it’s impossible to answer this in a general way; it is entirely on a case-by-case. Often times, mergers help to strengthen companies that individually would not survive, and if they didn’t survive, a valuable component of market share and service would be lost. On the other hand, sometimes it helps destroy smaller companies that provide unique boutique services which often are impossible for larger companies to provide, by squeezing them out of the market because they have greater buying power and can adversely manipulate the market. In the end, competition is always a healthy thing and it is important to maintain a balance between larger companies and smaller ones that are privately held.
Alicia Cervera Lamadrid, managing partner, Cervera Real Estate
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Mergers are fine if they still leave options in the market. Monopolies are the problem, which is some of the criticism regarding Anthem and Cigna joining forces. What makes America great is the idea of a consumer-driven free market. Without options we become closer to a dictatorship than a democracy.
Pandwe Gibson, executive director, EcoTech Visions
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In general, I think mergers help consumers as they typically bring the best of two companies together. Greater efficiencies and productivity should translate to lower consumer prices, while broader product offerings and distribution should improve consumer accessibility. On the downside, they can limit creativity, competition and product differentiation.
Julie Grimes, managing partner, Hilton Bentley Hotel
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Mergers are usually necessary for industries to survive, with the hopes that there is a win-win for the companies and especially consumers. As consumers, we don’t always see the financial benefits (i.e. the airlines), but I hope in this case we will see a change.
Felecia Hatcher, co-founder of Feverish Gourmet Pops
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I always believe that the consumer will be affected in a negative way by having fewer choices. We are led to believe that the economies of scale will yield cost savings for the consumer, but they usually yield profits for the acquirer.
Ann Machado, founder and president, Creative Staffing
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Mergers’ impacts on consumers vary by company and industry — a case-by-case analysis must always be done. Sometimes, they are great because they lead to more investment in product development and better customer service. I think the health insurer mergers will be a disaster for consumers, as there are already only a small number of good health plan choices. It appears to be another unintended consequence of the Affordable Care Act because insurers need to gain scale in order to keep their overhead within the law’s confines.
Victor Mendelson, co-president, HEICO
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It’s too difficult to lump all mergers together in generalities, but the trend will continue in an effort to increase shareholder values in a time of low interest rates and lackluster global growth. Although each deal is different, mergers can certainly create efficiencies that can positively affect the consumer.
Nitin Motwani, managing principal, Miami Worldcenter Associates
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The impact of mergers varies widely depending on the industry. Consolidations can drive efficiency through consolidation of administrative costs, which can help drive prices down for the consumer. Mergers can also raise industry standards. On the other hand, with fewer options, prices start to all look the same, meaning the consumers pay more. It all depends on the number of options in a particular sector. We as consumers and business people need to be wary when there are too few choices in the marketplace.
Abe Ng, founder and CEO of Sushi Maki
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Generally, mergers allow for efficiencies, a portion of which gets passed on to the consumer in lower prices and better services.
Todd Oretsky, co-founder, Pipeline Brickell
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Overall, I am not a proponent of mergers that leave the public with not enough choices, mostly because the benefit to the consumer is often compromised. For example, costs often rise, while quality of service and product tends to diminish.
Eduardo Padrón, president, Miami Dade College
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As long as potential monopoly situations are avoided, I’m always in support of free market enterprise. When two companies find a mutually beneficial way to bring their businesses together, consumers and corporate stakeholders ultimately (usually) benefit.
Joanna Schwartz, CEO and co-founder, EarlyShares
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I think it varies on the industry. Clearly, some mergers create cheaper products for the consumers by utilizing cost savings in manufacturing, distribution, or sales. Others clearly limit the choices of consumers and can be quite detrimental. However, usually that leads to a new competitor or innovation that puts pressure on the market leader. That is the beauty of capitalism.
Dave Seleski, president and CEO, Stonegate Bank
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Consumers could benefit from mergers if there are economies of scale and synergistic values realized; they would reap the rewards of more efficient operations. On the other hand, if competition is significantly reduced, then consumers would ultimately pay more.
Darryl K. Sharpton, president and CEO, The Sharpton Group
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Mergers and acquisition activity is an important gauge of economic growth and a sign that companies have the wherewithal and confidence to add new products or services that ultimately benefit the consumer.
Andrew Smulian, chairman and CEO, Akerman LLP
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I think it depends on whether the resulting merger is dominant in a field or simply a more effective entity. For example, there have been several effective mergers in the not-for-profit sector where the missions have been closely related, giving a new, powerful organization a more efficient use of resources. However, if a merger means that just one organization is left standing in a particular sector, then it will lack the competition needed to stay efficient.
Gillian Thomas, president and CEO, Patricia and Phillip Frost Museum of Science
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Ideally mergers should benefit consumers. They can create better products for the end consumer and strengthen the economy. However, two major issues to look for with a merger are the potential for workforce reduction and the creation of a monopoly.
Alina Villasante, founder, Peace Love World clothing
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Corporate mergers are not necessarily a bad thing for consumers. When two larger companies merge, it often creates a vacuum in the marketplace for smaller companies to fill, because there is always a subset of consumers who prefer to deal with smaller companies.
John Wood, president, Amicon Construction
This story was originally published September 6, 2015 at 3:00 PM with the headline "Corporate mergers may help or hurt consumers, say CEOs."