Discussion
The following are good reasons for mergers:
(I) Economies of scale
(II) Economics of vertical integration
(III) Complementary resources
(IV) Surplus funds
(V) Eliminating inefficiencies
(VI) Industry consolidation
Answer: D
Correct answer: I, II, III, IV, V, and VI
All six are recognised sources of genuine gain. Economies of scale spread fixed costs; vertical integration secures supply or distribution; complementary resources let each firm use what the other has; surplus funds find a use better than a poor internal project; eliminating inefficiency releases value a weak management was destroying; and industry consolidation removes excess capacity from a shrinking sector.
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