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Why Merger?--the case of two RI insurance firms

Everybody wants to be a boss. When two firms merger, apparently two bosses will become one. So why merger?

Well, there are many reasons:

  • economy of scale: big bargaining power, etc
  • cost synergy: save on overhead, marketing, PR, etc.

While I can go all day writing the benefits (and disadvantages) of mergers, it would be best to look at some real cases.

A week ago, Providence Business News published an report: Firms Brace for possible consolidation.

Two multi-decades old insurance firms are planning to consolidate (merge) to "cut down on overhead and share some employees" (direct quote).

While the reports indicates "such a merger is a going trend in the insurance industry", it is actually true in most industries. With the current economy continues going downhill, the trend will last for quite a while.

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