18xx Companies able to buy other companies, what will be the impact

Question

One of the fun parts of the 18xx games, is that its fairly easy to create your own (local) version. I like to create a dutch version (yes there have been two already but with limited availability). One of the main features in dutch history is that it stared with lots of small companies that merged into one at the end (although there are some new companies started the last couple of years).

1856 deals with the same situation, and they solved it with cash and loans (companies that couldn't pay their loan are merged into the national railway, which is fine but I like a different.

In 1870 companies can buy their own shares. But what if companies are allowed to buy shares of other companies. Would that be a workable solution. And how do the companies get enough cash to buy the shares.

The question is, is it a workable solution to allow (and even encourage) companies to buy other companies. Maybe only if the shares are in the lower part of the stock table.

Possible extensions could be:

• use of station markers of the owned company (or at least be able to pass through them)
• loan trains (only once per operation round so that a single train can't be run more than once).
• completely eat the company if 100% of the shares are owned. (including cash, trains and station markers).

Possible problems could be:

• two companies owing a third company
• circular ownership (A owns B, B owns A) which can be solved by selling at least 50%(including the president share) at once.

Answer 1

I'd love to see a proper set of Merger & Acquisitions rules for 18xx.

I suspect I would start with something like this:

• Companies may buy each other's shares with company cash.
• Companies may not buy more than 20% of another company without making a takeover bid.
• To make a takeover bid, a company must have enough cash to pay current market-price for all the shares it doesn't hold. It first buys all shares of the target company that are not owned by players or other companies. If that gets them >50%, then the takeover is successful.
• If it doesn't get them >50%, then they offer current market price to the other shareholders. If enough accept to get to >50%, then success, otherwise, they can raise the offer until they succeed, run out of cash, or give up.
• Any remaining shares are then forcibly bought at the highest price reached in the takeover auction.
• Once the company has been taken over, the new company has then eaten it. It can issue the share certificates of the takenover company as additional shares, diluting its own shareholdings.

That's a hostile takeover system.

A merger would go more like this:

• If two companies each own 20% of each other and both presidents want them to merge, then they should announce this. They need >50% of the shares to vote in favour. Shares owned by each other automatically vote yes.
• There is now one, bigger company with all the station markers and trains. If there are rules on the maximum number of trains a company can own, then this company can own twice as many. Share certificates now represent half as large a percentage as previously.
• The two Presidents' shares are combined into a single certificate, so that shareholding isn't diluted. The new President will have to exchange some of his previous shares to get the shareholding right (ie Pres share is normally 20%, the President's certificate they had before is now only 10%, so they will have to hand over two other certificates to balance it out: if they don't have that many, then they can buy them from the company; it certainly owns at least 20% of itself). If both of the Presidents of the pre-merger companies have the same shareholding in newco, then they have to agree when they announce the merger.
• Any remaining shares that remain with the company after forced purchases by the new President and making change to the old President are now available to be bought on the open market.
• The new share price is the average of the share prices of the two old companies.

Answer 2

Check out question 2:10 at The 18xx Rule Differences List: http://www.fwtwr.com/18xx/rules_difference_list/single_list.htm

From my own stalled attempts at 18xx design, possible other implications: in full-capitalization games, a player who funds a company can then use that company's profits to keep a chain of companies going. Partial-capitalization games affect the available capital to work with but also encourage further buying weirdness. Also, in my early playtests, companies ended up snapping up all the available stock on the market, leaving nothing for players to buy (which resulted in even more convoluted acquisition rules).

That list is super-helpful in opening your eyes to variants you've never thought about, along many axes of rule choices.

Answer 3

There is a prototype from Deep Thought Games named 1817 that has playtested rules for what you are looking for - plus a selection of really interesting stock market rules.

I haven't yet played it myself, but I have ordered all the wooden tokens for making station markers and wooden cubes for loan markers.