In order to operate and exist in the competitive environment these days, it has become a necessity to merge with or acquire another company.It may be in order to avoid/tackle competition in a better way, and to have synergetic/strategic benefits.
In the days of globalization, mergers and acquisitions may have become more likely but this is a continuing macroeconomic phenomenon, subject as in the past to imponderables, not an entirely new and irreversible development. (In the United States, for example, a first wave occurred in 1897–1904 with horizontal mergers between monopolies in railroads and electricity; a second wave occurred in 1916–1929 with mergers of oligopolies in primary metals, food products, petroleum products, transportation equipment, and chemicals; a third wave occurred in 1965–1969 with mergers of conglomerates; a fourth wave occurred in 1981–1989 with mergers in the oil and gas, pharmaceutical, banking, and airline industries; and, a fifth wave occurred in 1992–2000 in the banking and telecommunications industries.)
Competition brings declining profit margins in any market. This requires economies of scale, usually through Mergers and Acquisitions. M & A's have been around for decades.
When dealing with Mergers and Acquisitions, it is usually pointed out the negative aspects of market concentration. This is false. What led to concentration was the fall in the margins. Competition is fiercer because of stronger companies - which can invest in R & D and continue to lower margins. Just look at the auto industry: there is no room for the hundreds of producers of the early 20th century, but today prices are low and the product is getting more advanced.
As far as my perception goes, merger and acquisition is necessary in the contemporary context of globalisation, in order to tackle the competition effectively. The following are the advantages of merger and acquisition:
1. To enjoy the competitive advantage of both the companies
2. They can face the competition in an effective manner
3. To have a synergistic effect through merger and acquisition
4. They can improve their market share through merger and acquisition
5. Weaknesses can be overcome through merger and acquisition
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