Merger of XM and SIRIUS

Complete 7 pages APA formatted article: Merger of XM and SIRIUS. They span the radio spectrum in perfect sync with customer expectations. On March 24, 2008, the Justice Department approved the merger, thus clearing one of the biggest hurdles. Still, there was one hurdle though it is only of symbolic significance, i.e. the Federal Communications Commission’s (FCC) approval. Finally, somewhere by the end of July 2008, the approval of the FCC might be given, so that XM Satellite Radio and Sirius Satellite Radio will merge into one company with a subscriber base in excess of 17.3 million.

Mergers and Acquisitions take place when companies use corporate strategy to broad-base equity participation and seek to merge two entities to achieve scale economies. A union of the employees of two companies to be merged will be formed to take care of the employee concerns such as voluntary retirement for some employees, redundancy, and even asset-stripping. A merger can be either horizontal, vertical, or lateral. In addition to these three types of the merger there are con-generic mergers in which two companies in a huge industry may merge but do not share their customer bases. For example, a bank may merge with a leasing company. The merger of XM Satellite Radio with Sirius Satellite Radio is an accretive merger, because already the acquired company, XM Satellite Radio, has experienced a rise in its share prices since the announcement of the merger.

Potential mergers often raise concerns about the possible violation of antitrust legislation. Herfindahl-Hirschman Index (HHI), named after Orris C. Herfindahl and Albert O. Hirschman is extensively used in Economics, but now it is also used to measure the size of firms in relation to the size of the industry. Above all it shows the degree of competition in an industry. The Index is defined as the “sum of the squares of the market shares of each individual firm”. This means the average market share is weighted by the market share of the individual firm. The subsequent result is expressed ranging from 0 to 10,000.

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