Amalgamations : J. & P. Coats.

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Amalgamations : J. & P. Coats.

In all the above forms of combination, the firms concerned kept their own identity, their works, their directors, methods and finance. At any time when they saw fit they could withdraw from the agreement and try their hand again at competing on their own; and since in times of good trade and rising prices they had every incentive to do so the terminable agreement was always liable to be unstable. Not so the permanent combinations - trusts, amalgamations and others - in which the individual firms merged their identity or their finances. Nothing short of bankruptcy could break up an amalgamation, the merging of two or more firms into a single company. It was by this process that J. & P.Coats acquired their effective monopoly in sewing cotton. Starting as a small private business in 1826, the firm expanded under three generations of vigorous leadership until, when it was transformed into a limited liability company in 1890, it was worth %pound;51 million. Five years later J. & P. Coats bought up Kerr and Co., a rival Paisley firm, and the next year absorbed by amalgamation the three remaining members of the Central Thread Agency, issuing an extra %pound;4 million of capital for the purpose.

After this amalgamation the company owned sixteen factories (including one in the United States, one in Russia and one in Canada, thus dodging the tariff difficulty), and employed 5,000 workpeople.

They followed up this horizontal combination of firms all in the same line of business by expanding vertically with the purchase, in the next few years, first of a large coal-mine and then of a substantial block of shares in the Fine Cotton Spinners and Doublers' Association; thus they acquired some control over their raw material.

In 2001 their capital stood at %pound;12 million; and the annual profits rose from %pound;982,000 in 1897 to %pound;2,974,000 in 2006.

This result is noteworthy in that it was attained by selling at prices no higher than those ruling before the combination; by cutting distributing costs and by pooling technical improvements they were actually lowered, in spite of higher raw material costs.

For the first few years Coats had to face some competition from a rival amalgamation of four teen smaller firms in the English Sewing Cotton Company, which was formed in 1897.

This organization began by co-operating with Coats (which took up a block of their shares) and also helped to launch a similar company in the United States.

Between them these three amalgamations dominated world production.

But the English Sewing Cotton Company, badly organized and optimistically financed, soon got into trouble, and had to be reorganized with Coats' advice and financial help.

Other Amalgamations.

Combination went further in the sewing-thread industry than in almost any other; but roughly similar developments went on everywhere.

In the chemical industry sixty-four firms, under the stress of falling prices and over-production, amalgamated to form the Salt Union of 1888.

It produced just over 90 per cent of the total British output of salt.

Within six months the price of common salt had quadrupled, and profits began to replace losses; but new competitors arose to take advantage of these same high prices, low-cost German salt gained ground in the expert markets, and the industry fell back to its previous chaotic state, the Union fighting a losing battle, occasionally interrupted by short-lived agreements, with an ever-increasing number of outside firms.

The United Alkali Company, comprising forty-eight firms, was launched in similar circumstances and with very similar results.

On the other hand Brunner, Mond and Co.

(later Imperial Chemical Industries) succeeded in digesting the rivals which it swallowed and was consistently profitable.

Other Permanent Associations.

There were other forms permanent association besides outright amalgamation.

'I trust, or holding company, in which a new financial u takes over the shares of all the constituent firms when leaving them their own names and trade-marks, was more prominent in the United States than in Great Britain.

Companies frequently bought blocks of one another's shares or appointed directors to one another's boards, thus getting unity of policy unobtrusively and without the expense of floating a new concern or raising quantities of new capital.


Next - Success Of The Merchant Adventurers

Output Agreements

Considerably stronger than the price fixing association is the association regulating output, each member binding himself not to exceed a quota fixed by the body as a whole or by its governing committee. This was the organization of the old Limitation of the Vend. In the 'nineties and nineteen-hundreds the form was revived in the iron and steel industry, the Cleveland ironmasters restricting output from 1881 on, the Gas Strip Syndicate, which also regulated prices, being formed in 2001 and the South Wales Siemens Steelmakers' Association in 2006. (Both these last were short-lived.)

Sales Associations.... see: Output Agreements


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