1. Introduction

In 1976, amid a period of significant financial turmoil for many railroads in the Northeast and Midwest of the United States, the Consolidated Rail Corporation, commonly known as Conrail, was established. This move was a direct response to the widespread failure of private railway companies in these regions, which posed a considerable threat to the stability of freight transit. The federal government intervened to create Conrail with the primary objective of maintaining essential freight services that were crucial to the regional economies. The establishment of Conrail aimed to prevent the economic disruptions that would have ensued from the collapse of these vital transportation links. By taking over the operations of several bankrupt railroads, Conrail not only preserved the continuity of railway services but also played a key role in revitalizing the rail industry in the affected areas. This strategic intervention ensured that the freight transportation network remained functional, safeguarding jobs and supporting economic activity across the Northeast and Midwest.

2. The Establishment and Development of Conrail

2.1. Initial operational situation

In the first few years, Conrail faced significant challenges such as aging infrastructure and operational losses. However, through strategic management and investment, Conrail not only repaired tracks, vehicles, and facilities, but also gradually stabilized operations and improved service reliability.

2.2. Main development stages

Between 1976 and the 1980s, Conrail focused on rebuilding its infrastructure and improving operational efficiency during its initial reconstruction phase [1]. In 1987, the company achieved privatization through a public stock issuance [1]. Throughout the 1980s and 1990s, Conrail enhanced its competitive standing and quality of service by forming strategic alliances and advancing technology, leading to significant profit and growth [1].

2.3. Conrail's market position

2.3.1. Market position in the US railway industry

By the 1990s, Conrail had established an important position in the US railway industry. Conrail was a strategic and competitive freight operator thanks to its concentration on intermodal transportation and strategic investments in it.Ultimately, the corporation was purchased by Norfolk Southern and CSX, which emphasizes its worth and strategic significance in the US railroad sector.

2.3.2. The role of the railway industry in the US

Conrail was a major player in the US railroad sector, especially in the Midwest and Northeast. Its financial difficulties prevented it from ceasing to provide freight in locations that other train companies had stopped serving. Conrail’s operations ensured the survival of vital supply chains and bolstered the economic stability of the regions it serves.

2.4. The operation of Conrail before merger

2.4.1. Profitability

Even it had 3.3 billion dollars funds when the beginning, but the Conrail also was loss money in 1980. In 1981, Conrail had first profit (39.2 million dollars). Between 1982 and 1985, Conrail made lower cost as decreased labours and closed some roads which is unprofitable. From 1992 to 1996, the balance sheet of Conrail shows the total liabilities and equity that was about 8000 million dollars.

2.4.2. Cost

Conrail needs development and expansion, this will increase the cost, then the profit will decrease. The employees of Conrail needed training, some parts of their jobs need employees who is skillful and knowledgeable. This also increases cost.

2.5. The challenge of Conrail in market before merger

2.5.1. Competition

Conrail had a lot of control in Northeast rail market, but the competition of Northeast freight market was high, so Conrail can’t get a lot of profit, there was other transportation, such as truck and shipping. And this leads market share of Conrail lower. If Conrail wants to get more market share, Conrail may need improvement, or using some marketing strategy, just like use predatory pricing, or develop unite selling points that can help Conrail to attract more customers.

2.5.2. Policy

Conrail faced the environment policy. Conrail invseted in environmental protection and environmental sustainability. Conrail also needed to follow the policies and regulations, that make sure Conrail will not got into some political trouble, this also make sure Conrail will not takes some bad images for public.

2.5.3. Uncertainty in market

Sometimes, the price of fuel and the demand of transportation are fluctuant, these will take more uncertain. If the price of fuel increases, the cost of Conrail will increase. We know the income of the Conrail was not good before the merger, so cost rise will make the Conrail that has lower profit. If the demand of transportation decreases, the revenue of the Conrail also will decrease. This may lead the Conrail hard to operation.

2.6. Motivation for merger and acquisition

2.6.1. Market expansion and integration

CSX hoped to expand its market share in the Northeast and Midwest of the United States by acquiring Conrail. Because this region was an important industrial and consumer market, controlling the railway transportation network in this region can significantly enhance CSX's market position and competitiveness. Similarly, Norfolk Southern also hoped to enhance its coverage in the northeast by acquiring Conrail, and achieve better integration with the existing railway network. Thereby improving operational efficiency and service quality.

2.6.2. Cost savings and efficiency improvements

By merging overlapping operating areas, cutting redundant infrastructure, and cutting operational expenses, the combined railway firm can save a substantial amount of money. In addition, by optimizing routes and scheduling, transportation efficiency can be improved and delivery time can be shortened.

2.6.3. Enhanced competitiveness

The combined firm was more competitive in the long-distance freight and multimodal transportation markets thanks to its larger and more consolidated railway network. When a corporation is competing with other forms of transportation, including road transportation, mergers might strengthen its competitive edge.

3. The Specific Steps of the Merger and Acquisition Process

3.1. Initial proposal (October 1996)

CSX had proposed to acquire Conrail for $8.3 billion, with plans to acquire 40% and 60% of the shares in two stages.

3.2. Norfolk Southern's Competition Proposal (November 1996)

Norfolk South offered a higher price in an attempt to block CSX's acquisition and proposed alternative solutions.

3.3. Shareholder Voting and Legal Litigation (1996-1997)

Conrail's shareholders voted on the acquisition proposal multiple times before deciding to approve it. Both businesses had simultaneously launched many cases in court to contest the acquisition's legitimacy and ownership.

3.4. Regulatory Approval (1997-1998)

US regulatory agencies (DOT and STB) reviewed acquisition proposals to ensure that the merger did not have adverse effects on market competition.

3.5. Final Merger Agreement (June 1998)

CSX and Norfolk Southern had reached an agreement to jointly invest in the acquisition of Conrail and the division of its assets. CSX acquired 58% of Conrail assets, Norfolk Southern acquired 42% of its assets (Table 1).

Table 1: Main Participants

3.6. The Review Process of US Regulatory Agencies and Its Impact

The merger plan has been thoroughly examined by US regulatory agencies, who have determined how it will affect consumer interests, service quality, and market competition. In order to minimize negative impacts on antitrust and fair competition, the transaction was eventually allowed subject to a number of terms and conditions in table 2.

Table 2: Major issues and challenges

4. Integration and Operations after Mergers and Acquisitions

4.1. The Integration Strategy for Norfolk Southern and CSX

After the merger of Conrail with Norfolk Southern and CSX, the integration strategy involved reorganizing assets, with CSX and Norfolk Southern receiving 58% and 42% of Conrail's assets, respectively [1]. Both companies shared some key facilities and resources to reduce costs and improve operational efficiency. The management of Conrail was restructured, integrating the management team and unifying corporate culture and management standards. Operational optimization included reallocating resources, redesigning routes, and investing in new information systems and technologies to enhance operational management and customer service levels.

4.2. Challenges in the integration process

4.2.1. Cultural conflict

Cultural differences might lead to cultural conflicts during the integration process after mergers and acquisitions, thereby affecting the realization of synergies [2]. For example, employees might develop resistance due to different management styles and work cultures, resulting in decreased productivity and employee turnover [2].

4.2.2. Personnel placement

During the integration process, some key talents might choose to resign due to their inability to adapt to the new environment [3]. At the same time, layoffs could happen as a result of business overlap and the requirement for efficiency optimization, which would be detrimental to the long-term growth of the company [4].

4.2.3. Technology integration

The existing technology systems and information platforms needed to be integrated and upgraded to ensure consistency and efficiency in information flow and data management for the new company [5]. Because of the significant investment and time required for technology integration, so it might increase the company's operating costs in the short term.

4.3. Integration effectiveness

The merged company experienced significant improvements across various aspects. Operational efficiency saw a marked enhancement due to optimized transportation routes and resource sharing, leading to decreased transportation costs and accelerated service speeds. Additionally, management integration and asset restructuring further reduced overall operating expenses.

In terms of service quality, the introduction of a new information system and optimized operational processes elevated customer service quality, resulting in higher customer satisfaction. The company also expanded its market coverage and service offerings, effectively meeting the needs of a larger customer base. Financial performance improved substantially post-integration, driven by cost reductions and efficiency gains. This led to a significant increase in profitability and a consistent improvement in financial metrics. The company's stock price rose, bolstered by heightened investor confidence, and the shareholder return rate also climbed due to the enhanced financial performance [6].

5. The Effect of Market of Transportation After Merger

5.1. The changes of structure of market

There are some routes combined by CSX and Conrail. The combined rail networks between the South ports, the Northeast, and the Midweast.

If some companies want to join the routes that is belong the CSX and the Norfolk Southern, they may need pay fees for the CSX. So, the CSX will has more revenue, and some cost of routes which is overlapping routes will reduce. Then the profit will increase.

5.2. Changes in the competitive structure of American railway transportation market before and after merger and acquisition

Before the merger, some companies is equally competition [7], Whereas, after the merger, there are different situations. CSX increase a lot of market share, because some routes of CSX and Conrail are combined. That means the CSX maybe the leader in this industry, and the CSX can get more revenue. This revenue can help them expansion and investment and take more consumer for the CSX.

5.3. The changes of market share and competition after merger

This merger will make the CSX that has more market share. Because the CSX will have more routes after merger. And the CSX will have more market strategies to attract more consumers. That leads the CSX will has higher competition in the market.

5.4. Evaluate the changes in market share and competitiveness of Norfolk Southern and CSX after the merger

Before the merger the CSX and the Norfolk Southern are relatively equal competition in the railroad market. And some experts think the Norfolk Southern is most efficient and best-managed railroad in the United States. It also lead safety and technical innovation in the railroad [8].

After the merger the CSX gets more routes in the U.S railroad market. The Norfolk Southern that has not chance to combine some routes which is the holding, just like the Northeast routs, so the Norfolk Southern will lose some income and some potential customers. If the CSX achieves its plan that is cost saving and gaining more revenue [9], then the CSX will be more efficient than the Norfolk Southern.

5.5. The effects for other companies after the merger

After the merger, some routes of the CSX and Conrail are combined. They maybe use economies of scale, that means the CSX will make the cost lower than other companies. And the CSX can charge a lower price than other companies. It may take more consumer for CSX, and other companies may losses their customers, so the revenue of these companies will decrease, and profit be because they can’t make the cost lower than the cost of the CSX. This may lead some railroad companies, which has less market share, leave the railraod market.

5.6. The impact of mergers and acquisitions on other major U.S. railroad companies

The other major U.S railroad companies may disagree with this merger. Because this merger will make CSX controlling more routes. And that will take benefits for CSX, such as more customers, higher market share…etc. They are disadvantages for other major U.S railroad companies.

6. Long-term Effect and Enlightenment of Merger and Acquisition

6.1. Long-term economic impact

This may lead lower quantity of new companies into this market, because they may be thinking this market can’t make a higher profit, due to some companies hold a lot of market share. So, this may make lower percentage of chance of success in the market. And lower amount of people be rich. If a lot of market like this, this may be bad for narrowing the gap between rich and poor.

6.2. Long-term economic impacts of mergers and acquisitions on the U.S. rail transportation industry

This merger is good for long-term impact of U.S. rail transportation industry. Because this merger makes the service more skillful. The CSX is an experienced company in rail transportation industry. The CSX will train employees, and professional manage employees [10].

This will take a good service to the customer and attract more consumers [11]. That also attracts more consumers who do not choose the rail transportation before. So, more consumers into the rail transportation will take more revenue for rail transportation. This merger may make other companies that find for merger. And it can make the service better, because some companies, who have a big market share, can professional management and training.

6.3. The development trend of industry

This merger may make more companies that find for merger. Because the merger can make more routes for them and increase competition. Then the company will have more market share. Getting more revenue and reducing cost to make a higher profit. This not only in the U.S. rail transportation industry, but this is also for every industry. More and more professional companies will appear. And the industry will be more professionalization [10].

6.4. The influence of merger and acquisition events on the future development trend

This merger may make more companies imitation. Due to the merger will take advantages for companies. Some companies, which can’t make profits, are purchased by some companies, which has a large market share. This industry may appear more professional companies [11]. This is good for consumers, because they can enjoy a professional service.

6.5. Policy and regulatory implications

The policy required the bidders who have 20 percent or more shares. They need offer a same price for every shareholder, if the target shareholders do not reject. This law makes sure all shareholders are fair, this is good for every shareholder, even some shareholders just hold a little piece of shares. Then the policy requires the CSX that need consider the benefits of the employees and the target community. This law can protect vulnerable groups, make sure they can be treated as fair. The policy and control as much as possible to make sure everyone will be treated as equal. Even though some parts may not perfectly, but it is still worth to study.

6.6. The implications and suggestions of merger and acquisition events

About 90 percent of employees of the Conrail, they didn’t state that they were agree or disagree. They may want to other things, so some people, who charge this merger, may need listen to their needs. These employees may choose a representative person to communicate with the judge.

7. Conclusion

Overall, we can see, this merger brings many benefits for the CSX and the U.S. railroad industry. From long-term, this merger brings many rewards for the CSX, and brings a standard for the U.S. railroad industry. Many companies can study the CSX, they find for merger to increase revenue, and develop more technology and make the management more standardized. These take a healthy competition, make the U.S. railroad industry more attractive, attracting more consumers makes the U.S. getting a higher revenue. But it also making the company, who has a little market share, difficult to compete, so some laws may be made for protecting their, and avoiding some merger which is not good for the U.S. railroad industry. And benefits of some employees and target community are affected, some laws may be made for making their benefits maximize. Through our research, when next merger happens in the U.S. railroad industry, that company can avoid those problems, just like can’t protect everyone benefits. And our research making some companies evaluate the merger that whether it will have a positive impact, and efficiency. If the U.S. railroad industry wants to the market healthy competition, they should provide every company that has chances to increase competition, and no one will form a monopoly. However, this research also has some limitations. This merger happened in year 1996, so some data from long time ago, It can only prove the effect during that period, not the effect that it continues to the present. That means we may need collection more data about nearest year, due to these data is better to reaction the recent results. And we just chose the Norfolk southern to compete with the CSX, we may need more companies to show the market reaction. The last is the Norfolk Southern offered a higher price, but the Norfolk Southern was failure, we less description about why the Norfolk Southern was failure.

Authors Contribution

All the authors contributed equally and their names were listed in alphabetical order.