But then Company B agrees to buy them for $1 so that they continue running. Pays the employees, and continues running the service for customers.
Ban it?
versus scenario 2, Company A is profitable. Company B is smaller, but up and coming. An announcement is made that A will buy B and everything will be better. Layoffs ensue, product lines are dropped, employees and customers are very unhappy, but prices and profits are up.
Since scenario 2 is quite common today, and scenario 1 is relatively uncommon, yes, ban it, that's a better way to run markets.
We're conducting a thought experiment here. So we think through the implications and try to figure out if there is a way to achieve benefits for all, benefits that we know exist. Don't be scared of a single negative scenario, have to look at the big picture, what is better overall. I'm glad billionaires have the freedom to build kooky submarines that other multimillionaires can climb aboard and go on dangerous adventures, sometimes ending in the ultimate sacrifice. Why a whole bunch of other people who were uninvolved engage in weeks of hand-wringing, I can't grok at all.
I'm highly skeptical that heavily restricting buying and selling of companies in general will be a better way to run a market when it seems your goal is to prevent monopolies (or put another way, ensure competition).
Laser focused policies work for a short periods but tend to be worked around quickly as the thing they regulate falls out of favor in lieu of something functionally the same but different enough it doesn't match. Blanket policies tend to stifle the market in general, causing other problems. Rather than assuming that any specific law actually "solves" the problem, we'd probably be much better off setting criteria we're trying to match and and reassessing regulations regularly to try to meet that criteria. Anything unresponsive will be routed around.
The real problem is that we have things that do that (the SEC and FTC) and they're broken. We should fix them, not swap to a sledgehammer as the only tool available.
ah, the markets I am talking about are goods and services markets. Financial markets, they take care of themselves, and at the same time garner no sympathy from the majority who don't participate in them.
if monopolies emerge some other way, sure, break 'em up just the same.
But right now we let the market consolidate to the point where major industries have 2-4 major players with 80-90% market share between them.
I know this is already a stressed straw man in the first place but M&A are aren't a short simple process anyway. Adding some oversight isn't going to change that.
Yes there are tradeoffs to more regulation vs total anarchy/free market. That doesn't mean they're not worth it. "Good" is not the enemy of "perfect" and all.
Youtube, for one: https://techcrunch.com/2011/10/30/the-entire-1-65b-acquisiti...
Android as well, if I'm remembering correctly.
They don't necessarily need to complete the acquisition in a week, just get the broad details negotiated and agreed to. Given the GP's bankruptcy example, if they thought it was worth the risk the acquirer can extend a bare minimum amount of credit to keep the company alive while they do the rest of due diligence and finish the acquisition, folding it into a breakup fee.
Virtually every single bank failure that happens results in an M&A that is negotiated over a weekend.
Most recently Credit Suisse collapsed in March. UBS bought it on Monday, March 19, after negotiations began on Friday, March 16. UBS offered a price that was 60% lower than the Friday closing price. The deal was accepted.
A homeless man that has 6 hours left to live in the cold winter often cant get shelter, because instead we are really concerned with caterting the entire fabric of society to fictiontion problems that might one day affect a mismanaged business.
Clearly there are serious scenarios outside M&A where we accept terrible failures due to regulations. Why not accept some in M&A as well?
I think one could argue that the business failure is likely to affect more people, therefore it’s a greater impact. Still, I ultimately agree with this stance (in the context of business survival, not personal); failure is an inherent risk of business.
The context in this discussion is comparing the hypothetical of a homeless person dying due to a systemic failure to the hypothetical of a business going bankrupt (without being acquired) due to a systemic failure.
This concept of presumed innocence ought to apply to this hypothetical homeless person: why not give them shelter (analogous to allowing M&A) by default, until someone decides it’s a problem? If a society is willing to accept this personal death, they should be willing to accept a business failure.
I support the "no M&A" policy.
Would anyone ever invest in startups, in that scenario?
And, hey, if the business is successful, you own part of a successful business.
I feel old and you goddamn kids better be off my lawn by the time I get back with the shotgun.
The way you do it is the way it's always been done historically: offer a value proposition that justifies the money. And don't offer it for free at the beginning. People rightfully get very angry if you change the deal after they've come to rely on your product or service.
I still am clueless as to how to generate a network effect without giving things away for free. And as you said, once it's free, it's expected to remain free
The cynical me says that some people are able to generate a network effect because of fame or because of an existing network to which they belong (i.e. being chosen at YC or published in a newspaper). For example, FB was promoted to death in all US campuses for free during the 2000s. I wonder how that happened (honest question)
Are we discussing drug cartels? Because this reads literally like it could apply only to a highly criminal business.
We're just talking about a situation where some existing large interests have a lucrative business peddling some pretty addictive stuff, and they want to make sure nobody else encroaches on their turf. To that end, they're willing to spend a lot of money to "make the problem go away". Sometimes that means bringing the upstarts into the fold!
Not at all like drug cartels.
Sometimes it means asking the upstarts to say hello to your little friend.
Because they are expecting that the startup will turn into a profitable business, maybe?
Being acquired is very far from the only way that an investor can see returns.
Consider: if it is as you're implying, that investors expect their returns to be realized mainly through acquisition, and if it's indeed common that startup acquisitions are done to kill a potential competitor, then... all the investors are doing is extorting large corporations. If you include IPO in the picture, they're also alternatively robbing the public.
If it's just rich getting richer by pulling money out of megacorps and large populations, then this is... literally the opposite of useful, valuable contribution to the society.
The way I see it, the above isn't 100% true, but it seems true in majority of cases, which makes me inclined to support the "M&A ban" idea.
Not necessarily.
In fact, based on my experience I'd wager that in the bulk of the cases a bankruptcy would be far simpler from a paperwork perspective (but harder on the creditors).
little fish companies will be less likely to go out of business, and the economy will be more agile when they do if we stop allowing these big fat catfish to swallow everything in their pond.
Again, though, I'm not advocating for that position. I'd hate to spend part of my life building a business and not be able to cash out when the time comes for me to retire.
You can perfectly cash out by selling your business to private equity, or to anyone really.
Ban on M&A just means you cant sell a social network to Facebook, but you could sell it to Microsoft, to Autodesk, to Berkshire capital, etc.
If Company A was providing a service that people found helpful, someone else who is more competent at running a business will step in to fill that need. Employees will flock to the new better run business or move to some other better run business.
When new companies have to step up to provide popular goods and services that were previously being provided by failing, poorly run companies, it results in innovations and new ways of doing things instead of just letting bloated industry giants continue to be propped up artificially by restricting consumer choice.
Having more players in a market also increases resiliency and improves stability. If one company runs into problems, the others in that space can pick up the slack. No more "Too Big to Fail".
Company B can instead spin up its own business and ask Company A to advertise for them, but anything else is just selling out users.
So while possible in theory, if it's impossible to happen in practice, it's not a valid counterargument to a practical proposal.