The following benefits are expected to the derived because of mergers and acquisitions:

(i)    The growth rate will be higher than could be achieved through modernization or diversification.

(ii)    It is cheaper to acquire an existing unit than to set up a new unit.

(iii)    The scale of operations of the acquiring unit will go up due to which will reap several economies of large scale.

(iv)    The productivity will go up as a result of efficient and effective utilization of resources.

(v)    It would be possible to take new lines fo business activity.

(vi)    If the absorbed unit is sick or making losses, ti would be revived by the absorbing unit. Thus, the shareholders and workers fo the acquired unit would be benefited.

(vii)    It the combined units were producing similar products, competition between them will be wiped out.

(viii)    A merger may lead to tax benefits if a profit making unit takes over a loss-making unit. The merger of Gujarat Godrej Innovative Chemicals with Godrej Soaps Ltd. in 1993 is an example in this regard.Gujarat Godrej Innovative Chemicals with Godrej Soaps Ltd. in 1993 is an example in this regard.

The unit which merges with another unit is benefited in the following ways:

(i)    The unit which is suffering losses can avoid further losses by merging with a sound unit; and even the sick unit may be revived by the absorbing unit.

(ii)    The shareholders of the loss making merged company get shares in the profit making company.

(iii)    The employees of the merged company are suitably absorbed in the merging company. They need not be retrenched.

(iv)    The combined unit can achieve growth at faster rate by properly utilizing the resources.

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