Capitalism Lab - Takeover of a competitor! - First Intro then Play!

How to get rid of an insistent competitor? Ever thought of taking over the competitor and merging the competing company into your own corporation? In our scenario, we aim to consolidate the market, to reduce the price competition which could decrease our profits. The reason is, that the target company is continuously trying to capture our market share with very low prices! Now the question is, how to accomplish this takeover? For sure, a hostile takeover must be well prepared. Capitalism Lab + Subsidiary DLC. Watch, learn, play by yourself and have fun! :-) -- Watch live at   / lightproton  

00:00 - Intro
07:05 - Gameplay

In our scenario, we simply want to consolidate the market, to reduce the price competition which could decrease our profits. The reason is, that the target company is continuously trying to capture our market share with very low prices! Whereas this is beneficial to the consumers, having significantly lower prices to pay for a product, this is harmful for the sustainable business model of a corporation. The margins and profits will diminish quickly. And even, if companies start to sell products below their costs, the corporations soon will make huge losses and eventually could go bankrupt. -- https://en.wikipedia.org/wiki/Predato...

To finance the transaction, in many cases, the needed capital is borrowed from a bank. Financing the takeover via debt is called a leveraged buyout or LBO. Of course, the acquiring company must make sure to not over leverage debt. If, after the takeover, the debt cannot be serviced, this transaction can lead to insolvency or bankruptcy. -- https://en.wikipedia.org/wiki/Leverag...

A target company can defend itself against the hostile takeover. There are counter strategies to hostile takeovers which have been observed in the economy. A company could activate a shareholder rights plan or so-called poison pill. The idea is to issue new shares with a discount to existing shareholders, except to the acquiring company. This increases the price for the takeover because the existing shareholders now even possess more. And this poison pill could discourage the acquiring company to proceed with the hostile takeover due to higher costs. -- https://en.wikipedia.org/wiki/Shareho...

The benefits of the takeover are greater than the cost of the takeover if, simply, in the long run, the profits exceed the investment. This is called an opportunistic purchase. In other cases, the reason for a takeover could be strategic, as in our scenario, where we want to reduce competition to achieve a high profitability of our business model and avoid price wars with the target company.

Ultimately, the target company could avoid a hostile takeover by trying to buy the would-be acquiring company. It means, the target company turns the tables, and instead getting purchased by the acquiring company, the target company buys the acquiring company on its own. Sounds unrealistic? But it’s real. A well-known example is the attempt of the automobile brand Porsche to takeover the Volkswagen Group. While slowly acquiring more and more shares of the Volkswagen Group, suddenly, Porsche ran out of money, due to the financial crisis in 2007 and 2008. Immediately, banks asked Porsche to pay back their loans. In this critical situation for Porsche, the Volkswagen Group presented themselves as survivor to Porsche. Volkswagen loaned Porsche the money to pay back their debt and eventually took over Porsche. This defensive strategy to turn the tables in a hostile takeover is called Pac-Man defense, named after the popular video game. In this special situation, the Volkswagen Group is also called a White Knight, since takeover eventually was supported by the Porsche Group management and saved the Porsche Group from bankruptcy. -- https://en.wikipedia.org/wiki/Pac-Man...

Capitalism Lab simulates our real-life economy. Starting your own corporation, you can apply and try out business strategies which you can see with well-known companies in real-life. In Capitalism Lab, you will have the chance to take over competitors over the stock market. You can gradually increase your stake in a company in 5% points steps. -- https://www.capitalismlab.com/

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