(a) What is a business merger?
(b) Explain the reasons why some businesses merge.
(c) Give three disadvantages of business merger.
Explanation
(a) Business Merger; is the fusion of two or more business enterprises through direct acquisition of the net assets of the other i.e, the coming together of two or more formerly independent companies to form one bigger and united company.
(b) Reasons why some businesses merge include:
(i) To obtain the economies of large scale.
(ii) To gain security from cut- throat competition.
(iii) To diversify their activities.
(iv) To raise enough capital for expansion.
(v) To obtain raw materials from direct sources and at lower prices.
(vi) To fight economic recession.
(c) Disadvantages of business merger include:
(i) The business can become a monopolist.
(ii) Merger of companies may lead to un-employment as some workers may be retrenched.
(iii) It does not encourage specialisation.