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Assess the extend to which the merger between firms is in the interest of both consumers and the firms - Essay Example

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There are several benefits that an organization will enjoy because of a merger. One such benefits are referred to as economies of scale (Foster, 2010). Economies of scale take…
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Assess the extend to which the merger between firms is in the interest of both consumers and the firms
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Assess the extend to which the merger between firms is in the interest of both consumers and the firms

Download file to see previous pages... This is always luxurious to the suppliers, who in a bid to keep the market under consideration will offer discounts and sale their supplies to the merged organization at a cheaper rate (Cooper, 2006).
It is important to denote that the organization will not only benefit from discounted products, but it will also be able to easily access credit and finances from financial institutions cheaply. This is because of the increased size and capital base of the new organization. Another benefit of merger is that an organization is able to diversify its production and services. Take for instance, the merger between Pay Pal, and eBay. eBay is an online auctioneering firm, where as Pay Pal is an online payment system (Foster, 2010). On this basis, eBay is able to diversify the production of its services that is provision of online auction services, as well as providing services in online payments. Another important benefit of a merger is an increase in the market share of the new firm/ organization (Shenfelter and Hosken, 2010).
For instance, the failed merger between Daimler and Chrysler was to help the two organizations increase the share of their markets in the United States, and Germany as a whole. This is by taking advantage of the distribution channels that the two organizations commanded. Another benefit of a merger is that they result to improving the image of a company under consideration (Cooper, 2006). This is because mergers and acquisitions normally get huge media coverage, as a result, the companies can take advantage of this, to outline their policies, and also market their products. A company that experiences a merger will also manage to increase the value of its stock, and this is because of the perception that the new entity formed will be profitable (Foster, 2010).
For instance, the merger between US Airways, and the American Airlines was able to ...Download file to see next pagesRead More
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