Examples of why merger/ purchase/ amalgamation would happen:

1. to gain the benefit of synergy :the manufacturing company, struggling to cut costs on distribution may purchase another company which has a very well established distribution channel to support its logistics requirement. Thereby, the best features of both the companies, manufacturing and distribution, together will bring best RESULTS to the resulting company.
2. Mergers also happen to get benefit under the Income Tax Act, 1961: whereby, a company which is earning a lot of profit and incidentally has a huge tax liability may chose to buy a loss making company and take benefit of its loss to set off (and carry forward the loss too for further set-off) against its profits – thereby reducing its tax liability.
3. Diversification is also one of the most important reasons for merger: suppose you are successful MANUFACTURER of soaps which is a FMCG (Fast moving consumer goods) – and you would like to branch out and add more products under your brand name.You could start your own hair shampoo productions – construct a separate plant, buy new machines, develop new shampoo formula etc. etc. = a lot of COST + you also need to be BETTER than the company selling shampoos in the market. Instead, you could buy the company selling shampoo and add it to your brand name! You’ll get the readymade and working infrastructure/ factory/ machines/ shampoo formula/ employees/ ready market too!
4. sometimes mergers happen to build from strength to strength with very little delay : two moderately successful companies join to become one big fish in the pond. For example a pharmaceutical company buys the R & D division of another company to add to its R & D to develop new and improved medicinal drugs.
5. Mergers and acquisition also happens to eliminate competition: if a new and upcoming mobile manufacturing company is making small waves in the market – cut it off before it starts making big waves on its own and usurping your market position – buy it out so that ‘it’ becomes ‘
6. Merger or acquisition may also happen to enter another country in business terms : you are successfully running a telecom company in your country and you want to increase your footprint world wide – you buy small private telecom service providers in foreign LANDS!
7. Then there is the simple reason : to increase market share.

Examples of why merger/ purchase/ amalgamation would happen: