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Benefits of Mergers

Mergers. offer the following benefits:

1. It is and effective substitute for internal growth strategy.

2. It provides the benefits of synergy. When firms combine their operations, it improves their efficiency and profitability.

3. It increases earning capacity of the firms and Market value of their shares.

4. It enables the firms to diversify their operations and hold bigger share in the market.

5. It provides opportunities to merged firm to take advantage of R&D and technology of other firms.

6. When two or more competing firms merge their operations, it reduces unhealthy competition.

7. It provides tax advantage to the merged company if it is a profit- making unit and merges with a loss making unit. Losses of one business can be set off against profits of the other.

8. It provides economies of scale by enlarging the scale of operations.

9. It results in optimum utilization of resources.

10. It prevents loss- making units from  being declared as sick units, if they merge with the profit-making units.

11. It provides plant, machinery and other capital equipments to firms more economically than acquiring them from the market.

12. Managerial inefficiencies can be overcome by acquiring a business with managerial competence.

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