In today’s fast-paced business environment, mergers have become a common strategic initiative for organisations (Volberda et al., 2011). Mergers are projected to be based on shareholders’ proposition or creating value for them, however, it is argued that the decision is initiated by the management (Wolfgang, 2008). The motive may be different for firms in different situations. For some organisations it may be to survive in the industry by combining with a more established player in the industry (McCarthy and Weitzel, 2013), while for others it may be a strategy to compete better by achieving higher growth (Johnson et al., 2014). A recent merger proposition between bookmaking giants Ladbrokes and Coral became the limelight of the public attention (Kleinman, 2015), whereby the various reasons for the merger were highlighted, followed by two-sided opinions about them. On one hand, media updates depict the potential of greater market power (Farrell, 2015), higher financial benefits (Hall, 2015), faster online growth (GalaCoral, 2015), increased international presence (Schram, 2015) and strong position in the regulatory environment (Maidment, 2015); while on the other, analysts criticize the decision by pinpointing the probability of store closures and job losses (Wood, 2015), loss in share price and dividend yield (Head, 2015), unfit skills set for online growth (Nimmo, 2015) and uncertainty about decision confirmation (Martin, 2015b). With such mixed viewpoints, Ladbrokes Coral must take appropriate steps to ensure the success of the combined entity both in the short run and long run.
The most important reason behind the merger intention between Ladbrokes and Coral seems to be their aspiration to gain the market leadership position, i.e. they want to create a new entity which would be the largest bookmaker in the UK (Farrell, 2015). The new entity would have a total of 4000 shops (Rojas, 2015) surpassing the current market leader William Hill, which has only 2400 (Aglionby, 2015). Volberda et al. (2011) identify this as the principal reason underpinning most merger cases, whereby the merging organisations strive to achieve greater market power by ensuring that they will have an opportunity to sell more goods or services than their competitors. Bridge and Craven (2015), however, provide a critical review of this strategy saying that it will be a move with an aim to achieve dominance merely in terms of higher number of shops, and further mention that with the two companies merged together, they will have lots of duplicated shops within the same vicinity, which might not be very useful. Another critique about this strategy was that a single company would not be allowed by the CMA regulations to have that many shops, hence the excess shops will be allocated to smaller competitors like PaddyPower and Betfred; that again makes the purpose of this merger in vain (Kleinman, 2015). As a counter-argument to this, the management of Ladbrokes and Coral stated that even if they lose 1000 stores, they would still have 700 more stores than William Hill,
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