What benefits do mergers present to society?

Question

I know they do not provide many benefits, but what are the few benefits that mergers do offer society?

Answer 1

The primary benefit is better efficiency which can result in lower overall costs to consumers. For example, in the Time Warner / AOL deal, TW had content and AOL had delivery. If the companies were seperate, they would theoretically be less efficient at delivering content than they would if the companies were combined. Obviously, it didn't really work out that way.

Other efficiencies result from eliminating duplicate operations. For example, when Yellow Freight merged with Roadway Express, they could eliminate a lot of terminals (loading facilities) because they both had nationwide terminals. The result of this was that the companies did not have to charge as much to consumers to meet profit expectations because they did away with these expenses. Because they could charge less, their competitors would have to charge less as well (which they would do through increased efficiencies or by taking less profits).

The key word is "synergy." When companies merge because of synergies, the consumers benefit if those synergies are realized. Society in general benefits when operations are most efficient.