Advantages
- Economies of Scale: When two companies merge, the resulting company is larger and controls a larger portion of the market, so when its output increases, the company can lower the prices of its products, which benefits the product's consumers.
- Could Protect an Industry from Closing: When two companies are declining, a merger between the two could save the two from going out of business.
-doesn't require cash
-Accomplished tax-free for both parties
-A merger lets the target realize the appreciation potential of the merged entity, instead of being limited to sales proceeds.
-Allows the shareholders of smaller entities to own a smaller piece of a larger pie, increasing their overall net worth
Disadvantage
-Diseconomies of scale if business become too large, which leads to higher unit costs
-Culture clashes between different types of businesses can occur, reducing the effectiveness of the integration
-Some of the workers may be redundant, especially at management levels
-A conflict of objectives between different business, would result in difficulty in decision making and cause disruption in the running of the business.
- Economies of Scale: When two companies merge, the resulting company is larger and controls a larger portion of the market, so when its output increases, the company can lower the prices of its products, which benefits the product's consumers.
- Could Protect an Industry from Closing: When two companies are declining, a merger between the two could save the two from going out of business.
-doesn't require cash
-Accomplished tax-free for both parties
-A merger lets the target realize the appreciation potential of the merged entity, instead of being limited to sales proceeds.
-Allows the shareholders of smaller entities to own a smaller piece of a larger pie, increasing their overall net worth
Disadvantage
-Diseconomies of scale if business become too large, which leads to higher unit costs
-Culture clashes between different types of businesses can occur, reducing the effectiveness of the integration
-Some of the workers may be redundant, especially at management levels
-A conflict of objectives between different business, would result in difficulty in decision making and cause disruption in the running of the business.