BENEFITS OF MERGERS
1. Economies of scale. It 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: 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 A merger can enable a firm to increase in size and gain from many of these factors. 2. International competition . Mergers can help firms deal with the threat of multinationals and compete on an international scale. This is increasingly important in an era of global markets. 3. Mergers may allow greater investment in R&D T he 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 i...