What are the disadvantages and advantages of a merger?


Quick Answer

The disadvantages of a merger typically include the loss of jobs for workers and choice for customers, and the advantages are increased diversity and market penetration. Cost can be either a disadvantage or an advantage depending on location, industry and how the merger is handled.

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Full Answer

The disadvantages of a merger focus mostly on the workers and customers rather than the company itself. Most mergers result in workers being laid off to compensate for the smaller combined work flow requirements, which can leave a lot of workers unemployed. It also leads to restructuring the work environment, such as the management structure, which can lead to demotions or pay changes. Customers transition immediately from having multiple choices to only one, which in some cases leads to a monopoly of the service. This can result in higher prices for the customer due to lack of competition.

Advantages include a larger workforce and more diversity within the workforce. This is a great opportunity for new ideas to emerge within the company. A merger also results in a single company having a larger market, which benefits the profits and choices for the company. Cost is most commonly an advantage since a larger company is able to make products in bulk, which is cheaper per item than making smaller amounts of the product. However, cost can be a disadvantage because restructuring the company to incorporate another can be expensive.

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