Preventing businesses from going bankrupt by improving their financial condition or their ability to compete.
Financial rescue may be carried out by either the owners, by more financially powerful companies, by banks or by the state.
Methods of financial rescue include reducing the joint-stock capital by curtailing the issue of new shares and exchanging them for a greater number of old shares. The face value of shares may be reduced, resulting in the distribution of the profits over less capital. Thus new credit is obtained to keep the enterprise going.
The merger of Lockheed and Martin Marietta in 1994 means that together they will do about 60% of their total business in 1994 with the Pentagon. It makes them the sole suppliers of a range of important technologies which are vital to American defence.
The EEC/EU examines in excess of 60 notifications for mergers each year pursuant to the EEC/EU Merger Regulation. In all these cases the Commission adapts a substantiated decision by analysing the relevant product and geographic reference markets, as well as the impact of the operation on competition.
Financial rescue maintains potentially effective enterprises through periods of economic crisis.
Mergers are probably the way to go as defence procurement continues to plunge. Consolidation will preserve a strong defence industry rather than leaving military needs to an array of shaky companies whose survival is in question. In this way mergers allow the nation to maintain industries whose continuation is in the national interest.
Financial rescuing perpetuates unviable enterprises, decreasing the productivity of the state or nation.
The social price to be paid in any merger is loss of competition that can yield better products at lower cost.