Main drawbacks or disadvantages of business combination can be expressed as follows:
1. Bad Effects Of Monopoly
Business combination creates monopoly in the market. So, consumers may suffer from the evils of monopoly such as high price, low quality products, scarcities and black marketing.
2. Risk Of Over Capitalization
Combined business may suffer from over capitalization because of huge and unused capital. It may result in wastage of resources, fall in profit and lower rate of return.
3. Threat To Small Firms
Business combination is a big threat to other small business firms of similar nature. It is very difficult for small firms to survive and compete with combined firms.
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Business combination creates complexity to perform management function like coordination, controlling, supervision, directing etc.
5. No Identity And Goodwill
Identity and goodwill of old companies finish or decrease after combination.
