Evening star. [volume] (Washington, D.C.) 1854-1972, 1930-06-15
Benefits and Losses
Incident to Mergers
BY HARDEN COLFAX.

Government officials and legal author
tiles throughout the country are giving
deep consideration today to the relative
advantages of business consultations.
There is no question that the trend
OF the times is toward consolidation of
industry. Mergers which 20 years ago
would probably have been regarded as
nonopolies or moves toward monopolies
now are discussed as immediate posi-
bilities.
Business men who are considering
such mergers, however are by no means
certain as to the extent of their advan-
tages. Legal authorities are uncertain
just how far such amalgamations may
go under the statutes. Consequently,
there is much interest expressed in the
measure just introduced in the House of
representatives directing an investiga-
ton by the Federal Trade Commission
OF the relative gains and losses resulting
from big business mergers chain bust
ness operations and other business con-
solicitations. The commission will report
to Congress next December.
The resolution says that inasmuch as
there have been many mergers and
consultations involving millions of
capital In the last 10 years and as it
Is presumed great gains have resulted
to those whose interests have been con-
solidated, 1t Is natural to infer that
there may have been corresponding
losses to other interests in such con-
solicitations. The resolution suggests an
exhaustive study of the effects of
mergers on the stockholders and officers
OF subsidiary corporations and holding
companies.
Railroad executives many of whom
are anxious TO see various carriers
merged, admit frankly that there Is a
point beyond which consultations are
not profitable or economically advisable.
On the other hand, they insist that up
TO q certain point consultations are
profitable to the interests concerned.
They say, however, that merely because
the United States Steel Corporation was
successful merger, 1t does not follow
that other mergers would be equally
successful
One purpose in consolidation is to
make available a quality of manage
ment which cannot be afforded by a
small company Thomas r. Jones, vice
president Of the Harris Seybold- Potter
Co., declares that the real object of
mergers is to effect internal economies
In manufacture, distribution and ad-
chandising conditions and to smooth
sales and production variations, espe-
cially In businesses of highly seasonal
character Thus q company might be
able to choose its production so that
the seasonal peaks of one commodity
produced would Offset the valleys of the
others.
According TO Mr.. Jones, q consolida-
ton to justify its existence should ac-
complish things which it is impossible
to accomplish In independent business.
consolidation must produce a better
product at the same price or the same
product at lower price, he believes
and must produce more stability in the
industry and more profit for the inves-
tors.
The main object, naturally, of most
consultations is the reduction of over
head, management and distribution
charges. If one sales force and one sales
manager can do the work of the COM
bined forces Of three or four companies
1t obviously Is Of economic advantage.
On the other side of the picture
some business executives, even those
closely allied with consultations, de-
clare that mergers do not necessarily
bring economies In some instances
they say, it means a let-down in the
morale of the executives of the con-
stituent companies, and 1t deadens the
initiative of executives when final de-
cision is taken from their hands and
vested in a board of directors. Many
executives, it is claimed, think that
merger ends their tEoubles and they
can sit back and let Somebody else as
sumo their huBsens.
In many cases it is necessary, in order