13 - 19 January 2000

Merge and prosper

As Malta prepares to enter the European Union, and to reform and modernise its economy, some serious thought should be given to mergers between local companies, whether in industry or in commerce. Throughout the world, mergers are taking place at a rapid pace. Being part of the global economy means that frontiers and barriers are broken down and that competition becomes more intense. Some companies simply cannot survive in the global market place once their comfortable protection is lifted and Malta is no exception to this rule. Maltese companies should be merging now or planning to merge as soon as possible, not when all protective barriers are lifted.

Over the years some Maltese companies have done very well for themselves because they restructured and planned their future strategy on a long-term basis. Others also did well because protection gave them time to reform and change, while a few other companies have done nothing to change and want to rely on protection indefinitely. All companies must now realise that once Malta enters the European Union they will be competing on a more level playing field. It is important that they do not find themselves unprepared for this competition but it is a fact that Maltese businesses will now be subjected to intense competition in all commercial sectors, a competition previously unknown.

There are clearly too many actors in the local commercial scene and very often they end up fighting for the same small market share with the result that nobody manages to obtain a decent share of the market. Imagine the situation when Malta enters the European Union and competition suddenly intensifies. Would it not be better if certain companies merge and acquire a decent share of the market which could then be better defended, by strengthened companies, once Malta liberalises for good?

The days are over for companies who think they can survive, or even prosper indefinitely, without making some radical changes. Family owned companies can no longer do well simply because they have inherited representation agreements with international companies or because the family business has always done well in the past. Unfortunately, the most recent merger attempt in industry, that between Farsons and Marsovin, fell through. Besides setting a bad example to other companies who might have been considering some sort of merger, the decision not to merge was indeed unfortunate. A merger between these two important business players would have safeguarded employment in the long-term. Yes, there could have been some job losses in the immediate aftermath of the merger, but a merged company would have been in a better position to compete against imported products, through a consolidation of its top brands, which means that more jobs could be safeguarded.

In certain cases the best way of securing a viable future for some companies or employees is for them not to merge but to sell out to another company. Some businesses might not be able to survive in an open market even though they might produce or market top brands. However, if a company has been witnessing a declining market share, selling out to a bigger or stronger company might be the best option to consider. The Malta Business Weekly has already received reports about smaller companies which are about to be bought by larger ones. In one instance one of the conditions of the sale of a particular company to a larger one is that jobs are guaranteed for all the employees of the company being sold. This is very positive indeed. How much longer could these jobs have been safeguarded if the company in question remained operating on its own?

The same arguments made for companies to merge could more or less be applied for the private sector as a whole to speak with one voice. The Malta Business Weekly has long argued that there should be a merger between the Federation of Industry, the Chamber of Commerce and the Employers Association. Is it not ridiculous that there should be three main employer private sector organisations in a country the size of Malta? In the United Kingdom the main employer organisation is the Confederation of British Industry; in Germany it is the German Employers' Association and in Italy it is the Confindustria. In tiny Malta we have a number of organisations and to make matters worse, these do not always speak with one voice. Very often, however, this is due to outdated rivalry and piques, although one has to say that relations between all three organisations are at present excellent; all the more reason, therefore, for a merger to take place.

All employer organisations more or less agree over major policy issues such as Malta's membership of the European Union, liberalisation and privatisation. Wouldn't the voice of the private sector be that much stronger if the FOI, the Chamber and the Employers Association merge? This should be their goal in 2000.