In a business world, business persons boldly strive to get the patronage or custom of consumers to survive and amassed the hefty of benefit in the market. As the business environment exposed to stiff and harsh competition market actors conclude various types of arrangements or agreement to be successful in the market. Among those business arrangements which business persons routinely entered, merger is the one.
Merger is a business arrangement entered between two or more legally registered independent companies or business organizations and which helps those companies to establish another fused and combined company or business organization. In effect, one business company would be swallowed by another company hence rights and obligations of two or more independent companies or business organizations would be transferred to the newly merged company.
Merger arrangement could be carried out in different forms. Generally, merger could be materialized between companies who may have different line of relationship or companies who does not have any line relationship, what so ever. For example merger arrangement can be carried out when companies which are on the same production line, which is called horizontal integration, can merged and establish the new companies or it may be materialized among companies who are on different production line, which is called vertical integration. These ways of merger arrangement is streamlined between companies who are producing substitute goods or among input producing and input demanding companies. Other form of merger arrangement can be materialized when companies which do not have any any relation, which is called conglomerate, merged.
Merger arrangements have some identifiable benefits. Companies who produce substitutable goods could merge to enhance their market power and in effect could help merged company to decrease the production costs and realize the economy of scale. Hence, one of the benefits of competition, which is called production efficiency, could easily be realized. Secondly, merger arrangement between input producing and output producing also enhances the merged company to carry out its production activity in a seamless way.