What is a merger?

A merger is defined as the process where two or more companies combine to form a single entity. This involves the pooling of resources, assets, and operations, which can lead to increased efficiency, strengthened market presence, and enhanced competitive advantages. In a merger, the involved companies may dissolve their previous individual identities to create a new organization, benefiting from shared capabilities and synergy.

The other options describe different business activities: one describes an acquisition (buying another firm), another refers to divestiture (selling off parts of the business), and the last is a broad market strategy rather than a specific corporate action. Therefore, understanding that a merger specifically entails the combination of companies into a new entity clarifies why this is the correct definition.