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A recent study carried out by Harvard Business School Assistant Professor, Albert W Sheen, looking into the effects that mergers and acquisitions have on companies' products and services has shown that M&A has little – if any – adverse effect on products over time – even as the price of the product is changed.
The report allays long-held beliefs in business communities that mergers can potentially hit companies' stock prices, job security and – crucially for consumers – product price and quality. The difficulty in tracking the impact on product quality following M&A was that quality is a more inherently subjective trait to track than pricing, which can be easily quantified and assessed through facts and figures. In attempting to quantify the idea of quality, Sheen looked at back issues of Consumer Reports, the comparative consumer product review magazine that has been ranking competitive brands according to quality since 1936. The magazine bases its assessment of quality on in-house testing and customer surveys, giving Sheen decades worth of data to examine.
Sheen said that after a merger deal, the quality of products – or, at the very least – their capabilities and functions often increased, with manufacturers seeking to incorporate all the positive points of products involved in the merger into single marketable entities. For example, Sheen said, “If one vacuum brand had a retractable cord and the other did not, eventually, after the merger, they would both have retractable cords.”
The report has been accepted for publication in the Journal of Finance, and Sheen said that the ultimate lesson to be taken from the research is that M&A activity between consumer goods companies actually result in better value for consumers. He concluded, “I think it confirms a lot of the positive reasons companies give when they engage in mergers.”
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