Question

One reason that a firm may choose to merge or acquire another company would be diversity of products or services

Answer 1

Firms may merge or acquire other companies to diversify their products or services, forming a single larger entity or a conglomerate to enhance market efficiency and competitiveness. These decisions are subject to antitrust laws ensuring fair competition.

Step-by-step explanation:

One reason that a firm may choose to merge or acquire another company is to achieve diversity in their product or service offerings. A corporate merger involves two companies joining forces to become a single, larger entity, whereas an acquisition involves one company taking ownership of another. This can be done for several reasons such as becoming more efficient, acquiring new product lines, outpacing competitors, or seeking a fresh corporate identity. Mergers can also lead to conglomerates, which consist of multiple businesses producing unrelated products, allowing for diversification that can protect profits even if some areas perform poorly.

Despite the potential benefits, mergers and acquisitions can also carry risks such as the clash of corporate cultures, or the realisation of unforeseen losses. Decisions to merge or acquire are made by company managers and owners and are part of a business' natural right to pursue its best interests. Antitrust laws sometimes regulate or prevent mergers and acquisitions to ensure competition remains fair in the marketplace.

Answer 2

One reason that a firm may choose to merge or acquire another company would be a diversity of products or services. Firms know that the fastest way, but not always the least expensive way to acquire market share or expand their market is to merge with or buy-out a competitor.