There are two kinds of mergers: those between roughly orthogonal businesses that want to exploit some vague "synergies" between them (as in the AOL-TimeWarner case); and those between companies that were previously competitors, as in the constantly-growing brewery megacorp of Annheiser Busch. The latter is both much safer for investors, and much worse for customers, than the former; this type of merger has the direct goal of decreasing margin pressure by decreasing competition.
Sure. But if it works, it's amazing for the shareholders. Just look at Anheuser-Busch Inbev (and their history of merging/consolidating) and their soon to be merger with SABMiller.
And if you don't have the appetite to risk the merged company, the reduction in competition will spill over into other firms. So if you see a marketplace consolidating and you think the reason is to decrease competition, then buy one of the remaining independent firms.
