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I'm fully aware this might be pushing the boundaries of what is an acceptable question, given that it's about an economics issue rather than the show itself, but here goes:

I've been watching the Season 2 opener of Arrow, entitled City of Angels. Oliver Queen's company is facing a hostile takeover from another group led by Isabel Rochev (played by the wonderful Summer Glau).

Early on in the episode, Felicity explains to Oliver why it's so important he returns to the city to protect his company. The following dialogue takes place:

Diggle: "...Your mother's in prison Oliver. Her trials's coming up. Thea's out on her own. Your family needs you."

Felicity: "So does the family business. All the bad press after the Undertaking left Queen Consolidated right for a hostile takeover by Stellmoor International. They've gutted every company they've taken over. Once they gobble up Queen Consolidated, 30,000 employees are going to be out of a job - including one very blonde IT expert.

I know nothing about economics but the italicised section confuses me. Why would a company buy another company and then just shut it down? Surely a mixture of bad publicity and loss of revenue would be extremely damaging. Why not just leave the company open and reap all this extra revenue, especially since competition with said company no longer exists.

I can understand buying a company and shutting it down later if it can't turn a profit, but when a hostile takeover of a highly successful company like Queen Consolidated takes place, the above dialogue leaves me confused.

Does anyone have any business reasons why it would make sense? Note - I do understand there might not be an answer to this and it might just be the show's way of demonstrating that the company are the baddies (by causing such huge job loss) and that Isabel really hates the Queens. That's acceptable as an answer. But it would be nice to know if the exchange above has any logical business sense.

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3 Answers 3

up vote 3 down vote accepted

My answer is based on "Wall Street", not real-life economics. So in "Wall Street", there was discussion of a company's assets (buildings, raw materials, machinery, office equipment, intellectual property, etc.) being worth more than the cost of buying the company. In that case, a Gordon Gecko could buy the company in question, "liquidate its assets" as they said (by selling the buildings, equipment and patents) and wind up making a profit.

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1  
It's very common that a purchasing business will strip out whatever assets will be useful to them and sell off the rest. The overhead of maintaining the new company just isn't worth it when they already have the infrastructure in their own company and only care about the assets. –  Roger Mar 27 at 18:27
    
That movie's exactly what sprang to my mind when reading the question. That's basically what Gecko did with the company of Bud's father (and probably many others, too). And it serves the site right that our knowledge about economics comes from, well, a movie. ;-) –  Napoleon Wilson Mar 27 at 21:12
    
@NapoleonWilson Of course that's where our knowledge should come from! :D (That reminds me of the opening song in The South Park Movie: "Movies tell us what our parents don't have time to sayyyyyy!!" That applies to adults too, it seems.) –  BrettFromLA Mar 27 at 21:32

There are many reasons to buy a company.

For example: patents, know-how, market share, clients, diversification of business, new markets, eliminate competition, get what they need and sell the remaining.

For example in Pretty Woman Richard Gere character buy firms in difficulty and sells them to pieces, buildings, land, cars, intellectual property, etc, and make very huge profits. It's one way to make money. Sometimes is more profitable sell than try to rebuild an firm.

Isabel really hates the Queens

I think Isabel hates Oliver Queen, and not the Queens, because we is a playboy and don't care about is bussiness in a professional manner.

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-0: Hi Luis. As a new user to the site, I'm not going to downvote this - but it doesn't really address the question. All you've done is list a bunch of business terms. You need to be much more specific to get an upvote! –  Andrew Martin Mar 27 at 18:23
    
@AndrewMartin thank you for your kindness. –  Luís Sismeiro Mar 27 at 18:33

Disclaimer : I'm not a economic guy just a student of CS, so my answer may not be definitive or correct. Just googled and got some info that I'm going to share.

From HowStuffWorks

But sometimes the target doesn't want to be acquired. Perhaps they are a company that simply wants to stay independent. Members of management might want to avoid acquisition because they are often replaced in the aftermath of a buyout.

From InsideBusiness360

Employees also go through a lot when a hostile takeover takes place. Usually with a shift of control/ownership comes lots of organizational change, sometimes new bosses, loss of jobs and an overall attitude of "out with the old, in with the new".

Sometimes the changes entail letting everyone go, other times the new corporation maintains some employees for good or to train their own people.

Now as far as Felicity's emotional speech comes to play, I think she was trying to convince Oliver to come back. The whole sudden unemployment is nothing but her fear not confirmation.

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