RECONSTRUCTION OF COMPANIES VIA TAKEOVER AND MERGER AND THE CURRENT ECONOMIC CRISIS, AN ABSTRACT
(the abstract for my company laws research paper with Pn. Mahmudah, 1997)
" Two world wars and their intervening wars, revolutions, and crises are now generally recognized to be episodes in a single age of conflict, which began in 1914 and has not yet run its course. It is an age that has brought to the world more change and tragedy than any other in recorded history."
Current economic turbulence is yet another ‘episode’ that changes the world facet. The contagious effect of the Asian currency crisis that we have actually seen is something both complex and drastic: collapse in domestic asset markets, widespread bank failures, bankruptcies of many firms, million of unemployment, rising in poverty, crime, social and political upheavals.
Domestically, the once 1000 points bourses’ index cripples below its physiological level of 400s: the 7 consquentive years *5 growth jumps to negative forecasts: Ringgit, that have just crowned as among the best of world performing currencies early last year degraded into its weakest. That is how the once miraculous, proud tiger falls from the ‘heights of Olympus to the plains of Thesally.’ All the hard works for the past 41 years almost shattered into pieces.
The government and business communities hastily react:
The authority tightens its fiscal and monetary policies. NEAC (National Economic Action Council) and ‘Taskforce’ ministerial position are set up to find ways out. Various public donation funds established to collect people contributions. Saving campaigns are widely propagated. Danaharta and Danamodal are created to facilitate banking institutions. Public savings(Amanah Raya, Employees’ Pension Fund, and Tabung Haji) are used to boost up capital market. Pro-bumiputra policy is temporarily sets aside as cash-rich non-bumiputra firms are allowed to acquire stakes in bumiputra companies. Banks are urged to consolidate or merge. Existing laws are revised and new guidelines are being implemented. And a few funds are entrenched to assist small and medium industries (SMIs).
Reconstruction of companies via takeover and merger, as one of the above measures, has taken prominent headline lately. Basically, the necessity is not out of profit, but as a step to ensure companies’ survival. Though this process is widely applied today, it is not a current issue. Since early 1990s, after government signed international agreement to liberalize local market, companies, especially those in strategic industries (i.e. financial, transportation, and telecommunication) have been called to restructure or merge in order to increase capabilities and efficiencies. The main objective is to assure local companies remain competitive once the market is actually liberalized. The current crisis only serves as a catalyst to hurry up the process.
In international front, contemporary world is a bastion of economists, strategists, and cold calculators. It is a world of vehement competition and mergers in the name of economic integration and the rise of market power. If one follows the world business news, he will surely to come across to companies’ mergers or acquisitions news. Those companies put forward sundry of reasons to justify their move. The real essence is it is a predatory step to face globalization. Globalization is a catch phrase today. It is an undeniable effect that we are going to encounter in the next millenium. Going global or not is not a mere choice to be make. Often we talk about participating in globalization as if it were a choice we had. Globalization isn’t a choice. It’s a reality. Foreign companies and the government realize this, hence TNCs merged and the authority put up green signal for domestic firms to restructure.
As wealth or money being the 20th century primary source of great power, dominant behavior emerges among the companies in globalization process. We are witnesses to another great transformation in human history. Capitalism is fast metamorphose into super-capitalism (i.e. a highly concentrated finance-capitalism). And this super-capitalism may, in the future, transform into anti-capitalism, for it is impossible to continue concentrating ownership and control of property and resources without at the same time reducing the number of those own and control them. Thereafter, we might see that these neo-capitalists (companies) would takeover the control of nation-states throughout the world likes what has already happened to a country in Latin America. This country commonly named as ‘banana republic’ as its prime and only source of income is bananas industry. As this industry is fully under the control of foreign companies, they have great says in the government and social issues.
Is there any alternative to this? Yes. M.A. Chaudhury put forward an interesting proposal as an alternative to capitalist-globalization: the Islamic system of globalization. As communist has collapsed, and people started to scramble to find new kind of orders, the world is seem to move toward bipolar systems again, global-western and global-Islam. How we are going to materialize the Islamic system of globalization? M.A. Chaudury in his book, ‘Reforming the Muslim World’ analyzes the question. The first step we could clearly identify is that companies, especially local companies with Islamic objective, should restructure (whether via merger or takeover or other means), survive the current downturn and prepare to compete with the global neo-capitalists.
Conclusively, restructuring through merger and takeover is certainly an issue of deep impact and need further research for future benefit.