Introduction And Meaning Of Business Combination
In simple words, business combination means the combination (coming together) of separate business entities in order to achieve common goals. It is a process of bringing together the activities and resources of different firms under common control. The main objective of business combination is to earn massive profit by eliminating the competition in the market. It helps to establish monopoly and discourages new competitors to enter in the market.
Objectives Of Business Combination
The main objectives of business combination can be pointed out as follows:
1. To Increase Capital
By bringing together of separate business entities, it increases the capital and other resources of the acquirer. It helps to improve financial strength and operational efficiency of the combining firms.
2. Large Scale Production
Business combination helps to increase financial and technological capacity because of increased capital, and resources. So, when small businesses are combined together it increases the production capacity. So, it facilitates large scale production.
3. To Minimize Costs
Another objective of business combination is to minimize , management, operating and marketing costs. Combination of firms also lowers the cost of production because of large scale production.
4. To Maximize Profit
Because of lower cost of production and minimization of operating costs, it helps to maximize the profit of the firm.
5. Te Eliminate Competition
As we know that business combination brings different business entities together under single management and control, it helps to eliminate the competition among the companies. Elimination of competition helps to achieve monopoly in the market.
Also Read:
Advantages Of Business Combination
Disadvantages Of Business Combination
6. To Expand Market
Because of adequate financial and physical resources and effective operating and marketing activities it facilitates market expansion. Because of monopoly, company can easily increase its market share.
7. Entry Barrier
Business combination discourages new companies ti enter in the market.
