They could sell it to another mom and pop? It's only an M&A if the shop is bought by / becomes part of another business.
If nobody wants to continue running the independent shop, it doesn't make much difference to consumers if a chain buys it, or if it closes down and the chain just opens a new shop there.
> If nobody wants to continue running the independent shop, it doesn't make much difference to consumers if a chain buys it, or if it closes down and the chain just opens a new shop there.
You're pointing out exactly why banning M&A would be good for big businesses. Now instead of having to buy out the little guy, they just wait for it close and then buy all the assets (can assets be sold under this regime? do you just have to throw everything away?) and reopen under their own name. Now the mom and pop lost a bunch of money and the big company got a new location at a big savings.
Sometimes people want to exit. They want to retire, move onto a new chapter of their lives and not be involved in the business anymore.
Finding new management doesn't allow that - they can take on the day to day, but you still own the place and are ultimately responsible.
Keeping it in the family isn't an option if you don't have family that want it. If you have multiple family members that want it, you can give it to one and probably cause conflict, or you can have them share management/ownership of it and probably also cause conflict.
Turn it into a co-op? What if the owners have no idea how to do this? What if they don't want to?
Why should people who have created a business not be allowed to sell it and cash out? Why can't they get a payoff for their investment and move on? The solutions you're proposing are all about the community and totally ignore the actual people who spent years of their life getting the business going and probably took meaningful financial risk to do so. Why should we just ignore their desires and tell them what they're allowed to do with their business?
It's prevalent everywhere you look. As you say, M&As let small business owners retire or move away, without being prisoners of their own business. But the failure mode is companies being built with exit in mind, existing to be flipped - this is doing huge damage to the markets and peoples' lives right now.
Or take housing: it's nice that individuals have a way to sell their house and recover some of the money and effort put into it, when their kids leave the nest, or they retire, or they just want to move to some other location. But the failure mode of this is flipping - people and companies who buy properties, "improve" them to maximize resale value, whether the "improvements" make any sense or not for future tenants, and sell them to various actors. This creates a huge distortion on the real estate market, to the point that housing is now built for flipping, not for living.
(There's also a secondary and equally socially bad effect of owners opposing anything whatsoever that could lead to drop in (growth of) housing prices in their area.)
Or take finance: it's not hard to see the failure modes created by professional finance class, that's busy optimizing money flows in isolation from everything they relate to in the real world.
Or, take corporate management, and the rise of MBA class: specialists in running business as an abstract profit-generating machine, in complete isolation of what the business does and means in the real world.
Etc. etc.
This is the big problem I think we're facing: stopping over-optimization.
Thiz is a fantasy, these businesses were not going bancrupt - they were challanging big business and making a killing. Your scenario is detached from reality
Assuming that they close. If it continues to be successful and they can find someone else to run the business when they retire than Big Business never gets a chance to move in. If they don't, Big Business can buy their assets and try to open a new store there just like anyone else could.
Either way, everyone is happy. The owners of the store still retire, and the Big Business gets a chance to outbid everyone else who wants to move into a market that's already proven itself to be a success. That happens enough right now and it's not caused the collapse of society.
> Now the mom and pop lost a bunch of money and the big company got a new location at a big savings.
Why would Big Business acquire the store by paying Mom & Pop more money than M&P would have made letting it close and putting the assets up for sale to the highest bidder? Seems like the smart move for Big Business in that case is to wait it out anyway. If Big Business can convince Mom & Pop to let them be absorbed for less money than Big Business would have had to pay them at auction then M&P still loses money.
The way you typically do this is by selling the business to someone who wants to continue operating it.
> Either way, everyone is happy. The owners of the store still retire
Owning a business that is managed by somebody else in retirement is not the same as selling the business and retiring. If you still own the business, you are still responsible for it. If you have a great manager and just collect your checks from it, great! But what if that person quits suddenly/dies/etc.? Now you're managing the business again. If the manager of the business needs to work in it (e.g. retail store manager) and you moved away, now you've gotta get back there and start running it again.
Lots of answers in here speaking from very theoretical perspectives with a clear lack of understanding of the actual day-to-day reality of what owning a small business looks like.
Why did the big company save money this way? If it's cheaper for them to just wait for bankruptcy, why don't they just always do that?
It seems the only answer is that they are counting on continuing the popular "brand" of the independent store. But that brand is exactly tied up to this store not being part of the big chain, so continuing it would be pure deceit.
Or as ClumsyPilot says, the business wasn't going bankrupt at all. Bit chain just wanted it, and now they can't.
The $x million limit can be decided upon based on the industry and other factors.
>nobody would ever create Goodreads
Lots of people create of businesses and pursue non-profitable enterprises for non-profitable reasons.
Yes, that’s usually what happens if they don’t have family to take over the business or employees to sell the business too.
>business owners just wouldn’t start businesses.
Maybe in the VC world but those aren’t small businesses are they? Are people really starting restaurants and yarn shops solely so they can sell the business later down the road? Or is it because they have an entrepreneurial spirit and want to build a business the community is lacking in.
It’s hard to believe you honestly think people only start businesses so they can sell it later on.
No, believe it or not, most people with small businesses, which are worth hundreds of thousands or single digit millions of dollars, don't just let the asset disappear for no value when they can find a broker and sell it.
> Maybe in the VC world but those aren’t small businesses are they?
What are you talking about? The first sentence of my post that you're responding to literally says "mom and pop hardware store" - where do you see anything about VC funding?
> It’s hard to believe you honestly think people only start businesses so they can sell it later on.
At no point did I say that. I would wager heavily that you've never owned a small business.
Most people don't start businesses for the sole purpose of selling them, but the fact that you can sell your business is important for all kinds of reasons. Businesses generally require startup capital, much of which is provided by small business loans that the owner must personally guarantee. If you're not allowed to sell your business, you're trapped under those loans. Need to move somewhere? You can't. Want to get out and get a job? You can't.
Think of it like buying a house. If you couldn't sell a house, how do you think that would affect the market? I'll tell you how - more people would rent, because otherwise most of them would be trapped in their home for the life of the mortgage. Does that mean that most people buy homes solely so they can sell them later down the road? It does not.
Banning all M&A would run into a brick wall of unintended consequences. If no one can sell their business, then a significant percent of potential small business owners just wouldn't start businesses.
Then what would happen? Those people would go get jobs. Instead of them owning the things they create, those things would be owned by their employers. Instead of having the issue where someone goes and creates Goodreads but it gets bought by Amazon, nobody would ever create Goodreads. All you've done is save Amazon the acquisition cost.