One reason corporate mergers are feasible to this extent is that the financial transactions involve are, in effect, subsidized. Stock transactions involved in stock-swap mergers and buyouts are exempt from the capital gains tax. The interest on corporate debt accumulated in the process is also deductible.
Never mind whether capital gains and corporate income taxes are good or bad, as such. I think they're bad, too. But so long as they're in place, they should be paid at the same rate by all, without exempting some kinds of activities--especially when it amounts to a subsidy directed specifically to mergers and acquisitions.
Some free market advocates object to the use of the term "corporate welfare" for such tax loopholes. But the practical effect of such exemptions is exactly the same as if we started out with a tax rate of zero, and then imposed a punitive tax only on firms not engaged in such favored activities. Those who engage in the most capital- and R&D-intensive forms of production, and in mergers and acquisitions, are paying a disproportionately lower tax rate as a reward for doing so, and are thereby given an artificial competitive advantage at the expense of those not engaged in such activity.