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Economic Effect of Mergers and Acquisitions - 11/17/15

Two economists, Jason Furman and Peter Orszag, indicate that mergers and acquisitions may be hurting the U.S. economy.  In many industries like airlines, telecom, health care, and even beer, mergers and acquisitions have expanded the market power of large corporations.  According to the economists, this has hurt consumers in the form of higher prices and is likely exacerbating income inequality. 

Industry consolidation may have contributed certain businesses earning super normal returns - approximately ten times as large as median returns.  This has contributed to income inequality by increasing the incomes of executives and shareholders.

As indicated by the New York Times, separate research by two finance professors at the University of Southern California estimates that nearly a third of American industries were highly concentrated by twenty thirteen, up from a quarter of all industries in nineteen ninety six.

Several years ago, Whirlpool was allowed to acquire Maytag even though the two companies controlled three quarters of the market for certain home appliances.  Verizon and AT&T command about seventy percent of all wireless phone subscribers today.

Anirban Basu, Chariman Chief Executive Officer of Sage Policy Group (SPG), is one of the Mid-Atlantic region's leading economic consultants. Prior to founding SPG he was Chairman and CEO of Optimal Solutions Group, a company he co-founded and which continues to operate. Anirban has also served as Director of Applied Economics and Senior Economist for RESI, where he used his extensive knowledge of the Mid-Atlantic region to support numerous clients in their strategic decision-making processes. Clients have included the Maryland Department of Transportation, St. Paul Companies, Baltimore Symphony Orchestra Players Committee and the Martin O'Malley mayoral campaign.