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AQA, Edexcel, OCR, IB, Eduqas, WJEC

Last updated 22 Mar 2021

A merger is a combination of two previously separate firms which is achieved by forming a completely new business into which the two original firms are integrated.

A merger can be seen as a decision made by two businesses that are broadly “equal” in terms of factors such as size, scale of operations, customers etc.

The enlarged, merged business, through the changes made by combining both together, can cut costs, grow revenues and increase profits - which should benefit shareholders of both the original two businesses.

What typically happens in a merger is that a new company is formed - and the shares in the new company are distributed to the shareholders of the two original businesses in a suitable split.

This is what makes a merger different to a takeover: i.e.

  • A merger involves a new firm being created
  • A takeover involves one firm being acquired by another

Some Examples of Mergers

Some significant mergers in recent business history include:

2010: British Airways and Iberia merge to form IAG

2000: Glaxo Wellcome plc and SmithKline Beecham plc merge to form GSK plc

2014: Dixons plc and Carphone Warehouse merge to form Dixons Carphone

2015: Paddy Power and Betfair merge to form Paddy Power Betfair

2015: H.J. Heinz Company & Kraft Foods Group merge to form The Kraft Heinz Company

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