Jasz
VIP Contributor
Business organizations merge for a variety of reasons. The most common reason is that the businesses are struggling financially and believe they can improve their situation by merging.
They may have complementary products or services, or they may have the potential to increase their sales with a larger audience. Merging can result in lower overhead costs such as rent, facilities maintenance, equipment, employee salaries and benefits, taxes and utilities. Mergers may result in lower operating costs by eliminating duplicate positions, departments or processes within the organization. In addition, they may benefit from increased customer loyalty, greater customer base and an enhanced reputation.
To eliminate competition. For example, when a merger occurs between two companies that otherwise would be direct competitors, they are able to reduce costs through economies of scale. Both companies likely have similar production processes and infrastructure, allowing them to combine those into one streamlined process. Mergers also allow for increased specialization and division of labor, which leads to increased efficiency and higher productivity.
Mergers and acquisitions can be risky, however, since they usually involve two different corporations with different financial health, product lines, and corporate cultures. There are often issues of compatibility between the two organizations that need to be worked through in order for the merger to succeed.
They may have complementary products or services, or they may have the potential to increase their sales with a larger audience. Merging can result in lower overhead costs such as rent, facilities maintenance, equipment, employee salaries and benefits, taxes and utilities. Mergers may result in lower operating costs by eliminating duplicate positions, departments or processes within the organization. In addition, they may benefit from increased customer loyalty, greater customer base and an enhanced reputation.
To eliminate competition. For example, when a merger occurs between two companies that otherwise would be direct competitors, they are able to reduce costs through economies of scale. Both companies likely have similar production processes and infrastructure, allowing them to combine those into one streamlined process. Mergers also allow for increased specialization and division of labor, which leads to increased efficiency and higher productivity.
Mergers and acquisitions can be risky, however, since they usually involve two different corporations with different financial health, product lines, and corporate cultures. There are often issues of compatibility between the two organizations that need to be worked through in order for the merger to succeed.
