AQA Business Studies/Changes in Ownership

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A change in ownership can be because of many different factors. When ownership changes (for example from a Private Limited Company to a Public Limited Company) there may be a change in focus. For example, a private company typically has few, if any, institutional investors and a stable shareholder register. This allows the company to focus on very long term goals, to retain profit for future investment, etc. A public company, in contrast, will have a more diverse and changeable shareholder base. This can lead to the company needing to maintain or increase income distributions year-on-year which could be against the best long term interests of the company.

Takeovers and mergers[edit]

These are the main ways change in ownership can occur.


This is where one company takes control of another. It can be an agreed takeover which happens when a current owner and an external person agrees a price which the share of the company is sold for. It can also occur in hostile conditions where a potential owner goes about collecting shares, buying off the market when they are made available and trying to get a large enough share to control the company. In the United Kingdom, public company take overs are governed by the Take Over Panel and company law. These set rules around how a stake is accumulated, the timetable for making an offer, etc. They also ensure all shareholders are treated equally.

Many advantages can be taken for the new owner. These include:

  • Brand name retained
  • Reputation retained
  • Customer base retained
  • Staff/expertise retained
  • Patents and designs retained

Even if the failing companies get taken over, the best parts of the companies can be retained, or the market share can still mean a larger market share (e.g., Volkswagen take-over of Skoda - Skoda before the takeover was known as a bad quality car but Volkswagen then put its engines and reliability into Skoda and before long Skoda became a good quality car at a lower price point).

Disadvantages can also be experienced:

  • Not only the good parts of companies are taken over, but also the bad parts
  • The cost of completely taking it over can be huge


Two companies may decide to join together to gain synergies. This could be where the companies have complimentary products (allowing a wider range to be offered or to cover a greater geographic area), have significant overlap (allowing duplication and hence cost to be eliminated) or other reasons. This is called a merger. An example is the now HBOS where Halifax and the Bank of Scotland merged and also Lloyds TSB when Lloyds merged with Trustee Savings Bank. Lastly when two gaming companies merged called Activision and Blizzard to form Activision Blizzard.


Vertical Integration[edit]

Horizontal Integration[edit]