Buy-out’s and Economic analogy to a small War

April 25, 2007

This is the first of many new posts I hope to make. Somewhat just capturing the cognition I get at any one moment about financial information that might be interesting or a possible good theory in today’s world. So lets get started!

One thing that I’ve noticed in the economy is the interesting market shift whenever there is a buy-out. When one company acquires another company, it is a dramatic move. Like most societies, people will follow great leaders. Thus when a larger company, a recognized leader, buy-out another business it is a big deal. Many investors think to themselves “They must know something I don’t! That’s a large investment! If they are willing to risk several hundreds of thousands to several million, what’s my little piece of the pie?” Thus there is a heighten term of which the price of that stock will grow.

Being said, of course these terminologies are not bound to just stocks. It’s also similar to every day business. If someone’s willing to invest a lot into someone, you have a general feeling that they are serious and they will not be as likely to fail.

Another corperate buy-out strategy, I’ve noticed, is when a company starts buying out multiple smaller companies. They lash out and buy up multiple smaller firms and group them together, sort their technology, make it their own, and perform integration over several aspects of a single field or possible bringing together multiple fields into an all-in-one solution.

One thing I always love to compare financial information with is a small regional war. Each region (or in the market they say Sector) is competing over resources. Some might think of this as “cash” or “profits” but that is a misconception. Specifically the resources these small nations (companies) are battling over are terrorial stakes of land, which are not quantized by their worth in gold, but rather their quality as a reusable and renewable resource (specifically Customers!)

As few nations fight over the available “customers” they are competeing to win the trust and loyality of a reoccuring resource from quarter to quarter. This provides one thing that is the majority of what the world is looking for “stability”. People do not desire the unknown, they fear it. When things are predictable, they are confortable. Same rules apply in their decisions for their own futures, of course some are less conservative and also even fewer make their metals while doing it.

Thus, how can you find a buy-out rush?

This is a power struggle over a specific sector of the market. As one competer becomes more powerful and more dangerous as a threat to the other competors, fear will start to cause a reaction. When there is such fear there are multiple war stratigies that really stand out. Of which are the explained above but in different terms:

1.) Acquire more resources to ensure a stronger defensive as well as arm yourself with a possible retaliation. (Which mimics buying out smaller companies to gain leverage).

2.) Conquer the surrounding nations and acquire their power and make it your own. Taking their Society, their methodologies, their technology, and their resources to help stage a later step in the war.

3.) (Not noted above, but is easily recognized) Collaborate with other forces to help combat a common enemy.

Thus there are some interesting warning signs that might bring about the ability to perform a “buy-out” or collaboration of resources.

1.) A health army capable of showing presense or power. Too small of an army will be ignored and more lightly be the surrounding nation that gets assembled.

2.) A super power, but not overpowered. When there is a threat over the horizon, things change, people change. Although if there is a threat that is overpowering, such that hope is crushed and passions for “freedom” (or whatever) are passified, then there this will not happen.

3.) Fear and competition. This is a very critical aspect. Say we have the same situtaion as the above two poitns #1 and #2, but there is plenty of land and resources to go around… Then there would be no reason to fight just yet. The first step for each nation would be to acquire as much land as possible before preparing for a confrontation. Thus fear and competition play a major role as the catalysis.


One Response to “Buy-out’s and Economic analogy to a small War”

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