A real life example of Mergers and Acquisitions can be seen in the recent back and forth between Men’s Wearhouse and Jos. A Banks Clothiers Inc. Earlier in the Year Jos. A Banks offered to buy out Men’s Wearhouse only a month ago, yet after declining this deal Men’s Wearhouse turned around and offered to buy Jos A. Banks for 1.54 billion. According to the article investment banks routinely have been pushing for this merger for several years but only until recently has anything actually come from the advice.
The main reason for merging the two companies is due to cost savings and increased sales. -Ed Bosek, a managing member of New York-based hedge fund BeaconLight Capital LLC, which owns shares of both retailers, said in phone interview. “You put these two companies together and you have the biggest publicly listed men’s apparel company with potentially very high margins and a good business.”- This clearly is an economies of scale story. Through combining different administrative departments, costs would decrease and the combined market share would allow for further cost savings. Men’s Wearhouse has the ability to finance the acquisition through cash unlike Jos A Banks.
This scenario shows that there are benefits from merging companies. An interesting follow up question to this article would be what percent of the market do both companies control and how much they would be expected to have after the merger.