Firms propose mergers for many different reasons. For horizontal mergers they may be buying technology or customers in anticipation of synergies or economies of scale. For vertical mergers they may see advantages in coordinating activities and reducing transaction costs. For conglomerate mergers, they may expect economies of scope, perhaps in marketing a product range. Where technologies are evolving fast and in difficult-to-anticipate directions, they may even view mergers as an insurance policy or a way to experiment with new ideas. All these can be claimed as efficiency motives. Mergers are also a way to change corporate control. The threat of takeover is a discipline against an ineffective management team. The threat does not always work and some mergers are proposed by managers seeking personal aggrandisement at the expense of shareholders. Other mergers are a way for a family firm to capitalise on its wealth creation when there is no natural successor. A further motive, of course, is the pursuit of market power. Competition policy is important even if this is not the object of the merger – efficiency or corporate control motives may still result in mergers that have the effect of impeding competition.

The EC Merger Regulation (ECMR) was first implemented in 1990. The original test for a merger was that it would not be allowed if it created or strengthened a dominant position.