Ethical Considerations in Mergers and Acquisitions
- Liam Kelly
- Jan 8
- 2 min read
Updated: Feb 20
Chris Xu
Abstract
Mergers and acquisitions (M&A) refers to the process whereby companies consolidate via financial transactions such as mergers, acquisitions, tender offers, asset purchases, and management acquisitions. An often neglected aspect of M&A are the potential ethical implications for stakeholders. This paper will consider the ethical impacts of several types of mergers and acquisitions through the lens of normative ethics, using concepts from utilitarianism, agent-centered and patient-centered deontology, and agent-based virtue ethics to develop an ethical framework to broadly assess the ethical soundness of M&A cases.
I. Introduction
Mergers and acquisitions (M&As) have long been an integral part of both the corporate and economic landscape, allowing companies to expand their market influence and scale by bypassing the time and costs associated with organic growth. The fundamental objective of every corporation is to maximize profits, which in turn increases shareholder dividends. Most commonly, companies perform M&As for the following reasons: synergies – businesses address their weaknesses and leverage the strength of partner businesses by combining business activities to bolster overall efficiency and reduce across-the-board costs; growth (as aforementioned) – businesses enjoy increased market share, bypassing the time and costs associated with growing a business organically; supply-chain pricing power – businesses acquire distributors, cutting marginal costs that were spent on contracting distributors by supplying products internally; and eliminating competition – solidifying market power and expanding market share. These incentives allow companies to achieve their fundamental objective.
M&A has become increasingly prevalent, with 790,000 transactions completed worldwide at the turn of the millennium, a number that has skyrocketed by 1176.9% since 1985, accruing a known value of $57 trillion. The increasing prevalence of M&A—dubbed “merger-mania” by many economists—has heightened concerns about the ethical impacts of. . .
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