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A merger occurs when two firms join together to form one. The new firm will have an increased market share, which reduces competition. This reduction in competition can be damaging to the public interest, but help the firm gain more profits.
However, mergers can give benefits to the public.
1. Economies of scale. This occurs when a larger firm with increased output can reduce average costs. Lower average costs enable lower prices for consumers.
Different economies of scale include:
- Technical economies; if the firm has significant fixed costs then the new larger firm would have lower average costs,
- Bulk buying - A bigger firm can get a discount for buying large quantities of raw materials
- Financial - better rate of interest for large company
- Organisational - one head office rather than two is more efficient
· Note a vertical merger would have less potential economies of scale than a horizontal merger e.g. a vertical merger could not benefit form technical economies of scale. However in a vertical merger there could still be financial and risk-bearing economies.
Some industries will have more economies of scale than others. For example, car manufacture has high fixed costs and so gives more economies of scale than two clothing retailers.
More on economies of scale
2. International Competition. Mergers can help firms deal with the threat of multinationals and compete on an international scale.
3. Mergers may allow greater investment in R&DThis is because the new firm will have more profit which can be used to finance risky investment. This can lead to a better quality of goods for consumers. This is important for industries such as pharmaceuticals which require a lot of investment.
4. Greater Efficiency. Redundancies can be merited if they can be employed more efficiently.
5. Protect an industry from closing. Mergers may be beneficial in a declining industry where firms are struggling to stay afloat. For example, the UK government allowed a merger between Lloyds TSB and HBOS when the banking industry was in crisis.
6. Diversification. In a conglomerate merger two firms in different industries merge. Here the benefit could be sharing knowledge which might be applicable to the different industry. For example, AOL and Time-Warner merger hoped to gain benefit from both new internet industry and old media firm
What else can I help you with?
What is an economic advantage of piezoceramics?
The economic advantage of piezoceramics is that it is inexpensive and economical. This is because it makes use of less electricity than EEPROMS.
A far-reaching river system was an economic advantage for which sections of the US during its expansion and development?
south and west A far-reaching river system was an economic advantage for which sections of the US during its expansion and development?
What is the definition of absolute advantage?
Absolute advantage exists when one economic agent can strictly produce more than another agent in a given good or service. This is different from comparative advantage, which occurs when an economic agent can produce for a lower opportunity cost than another agent.
Why is an economic advantage for a developed nation often a disadvantage for a developing?
yes it is necessary
What effect does increasing economic interdependence have on the countries of the worl?
A loss of comparative advantage.......
Which company is a conglomerate merger?
A conglomerate merger is one between two strategically unrelated firms from which economic benefits is not possible for the bidder or the target. The merger between Walt Disney Company and American Broadcasting Company is a conglomerate merger.
How far did people in Singapore support merger with Malaysia?
Support for the merger with Malaysia among Singaporeans was mixed in the lead-up to the 1963 merger. Many viewed it as a way to achieve economic stability and political strength against the backdrop of anti-colonial sentiments. However, there were also significant concerns about the potential loss of self-governance and cultural identity. Ultimately, the merger was approved, but tensions between Singapore and the Malaysian federal government led to its separation in 1965.
What are Drawbacks to a merger?
Drawbacks to a merger can include potential culture clashes between the two organizations, leading to employee dissatisfaction and reduced productivity. There may also be significant costs associated with the merger process, including legal fees, integration challenges, and potential layoffs. Additionally, the merger could result in regulatory scrutiny, which may delay or complicate the integration process. Lastly, the anticipated synergies may not materialize, leading to financial underperformance.
What micro economic policy changes would you recomand to increase south Africa's export potential?
micro economic policy to increase S.A exports potential micro economic policy to increase S.A exports potential micro economic policy to increase S.A exports potential micro economic policy to increase S.A exports potential micro economic policy to increase S.A exports potential micro economic policy to increase S.A exports potential micro economic policy to increase S.A exports potential
What was slavery used for?
For economic advantage.
What is an economic advantage of piezoceramics?
The economic advantage of piezoceramics is that it is inexpensive and economical. This is because it makes use of less electricity than EEPROMS.
Merger and acquisition of commercial banks in Nigeria?
what are the needs for social and economic foundation of co-operative association in nigeria?
What are Advantages and disadvantages of conglomerate merger?
disadvantages- unlikely economic benefits will be generated for the target or the bidder advantages- diversification
What are merger waves?
Merger waves refer to periods characterized by a significant increase in merger and acquisition activity within a specific industry or across the economy. These waves often occur in cycles, driven by factors such as economic conditions, technological advancements, regulatory changes, and market trends. Each wave can vary in duration and intensity, often reflecting the prevailing business environment and investor sentiment. Historically, merger waves can be linked to both periods of economic expansion and downturns, as companies seek consolidation for growth or survival.
What are types of merger?
Purchasing Merger Consolidation Merger
Disadvantages of decentralization?
advantage and dis advantage of centralization and decentralization advantage and dis advantage of centralization and decentralization
What is the Merger of companies at different stages of production?
The merger of companies at different stages of production is known as a vertical merger. This type of merger occurs when a company combines with another company that operates at a different level of the supply chain, such as a supplier or a distributor. The primary goal of a vertical merger is to increase efficiency, reduce costs, and improve the overall control of the production process by streamlining operations and minimizing supply chain disruptions. By integrating these different stages, companies can enhance their competitive advantage and better respond to market demands.
