What Are the Pros and Cons of Mergers?

pros-cons-mergers Credit: Spencer Platt / Staff/Getty Images News/Getty Images

The pros of business mergers include factors such as monopoly regulation, research and development, duplication avoidance and network economies, while the cons include factors such as higher prices, less choice and job losses, according to Tejvan Pettinger at Economics Help. Depending upon the scale, business mergers tend to help top executives and shareholders, but consumers and employees tend to suffer most of the cons. However, this depends on each individual merger.

Mergers have some advantages for the business but also some disadvantages for consumers, Pettinger explains. In the pros column, research and development helps provide companies with the resources needed to develop new products and technology, so the merger provides funds to the new business. Furthermore, sometimes a business merger does not result in a monopoly if the government properly regulates this newly cemented business and keeps it from raising prices.

Of course, this does not mean that higher prices do not often result from business mergers because lax regulation sometimes does lead to monopoly pricing, Pettinger writes. A merger also may result in job losses, especially when the new business engages in asset stripping and eliminates under-performing sectors in order to maximize profits. Furthermore, business mergers have the possibility of creating less choice for consumers.