It's not an obvious solution, because in that regulatory environment people will avoid creating small companies in the first place.
They won't avoid it to get some minor edge.
They will avoid it because every company formation and financial advisor will point out that it's commercial suicide to start your own company in that environment, and that instead you should take your idea to an existing company which specialises in opening "nearly autonomous departments", for an instant 30% or so increases in post-tax income, or 30% edge over competition on prices, or 30% edge on salaries you can pay, for exactly the same kind of business. (30% representative of some countries not others... adjust for your locale).
The few real companies specialising in that would love your M&A and tax regulations, as they could take a few % of every small business' profits, and have some levers of control, effectively government mandated.
After that, the millions of small companies which already existed, who cannot consolidate due to your M&A restrictions, will gradually either go out of business due to competition, or find a way, though contracts, deeds etc, to transfer their activity into these "autonomous department" companies without actually merging. It's not uncommon to transfer some of a company's activity this way already, so that would just be scaling it up.
You can try restricting all of that, but it will be very difficult as you would have to do it restrict what sorts of things people can agree to in contracts in a very significant way, and in doing so, restrict what are currently effective business arrangements for some companies to make them less effective. That would be an enormous change to business culture, and I suspect even if you did restrict what can be agreed in private contract terms, alternative ways to transfer what gets done where would be found very quickly and easily.
They won't avoid it to get some minor edge.
They will avoid it because every company formation and financial advisor will point out that it's commercial suicide to start your own company in that environment, and that instead you should take your idea to an existing company which specialises in opening "nearly autonomous departments", for an instant 30% or so increases in post-tax income, or 30% edge over competition on prices, or 30% edge on salaries you can pay, for exactly the same kind of business. (30% representative of some countries not others... adjust for your locale).
The few real companies specialising in that would love your M&A and tax regulations, as they could take a few % of every small business' profits, and have some levers of control, effectively government mandated.
After that, the millions of small companies which already existed, who cannot consolidate due to your M&A restrictions, will gradually either go out of business due to competition, or find a way, though contracts, deeds etc, to transfer their activity into these "autonomous department" companies without actually merging. It's not uncommon to transfer some of a company's activity this way already, so that would just be scaling it up.
You can try restricting all of that, but it will be very difficult as you would have to do it restrict what sorts of things people can agree to in contracts in a very significant way, and in doing so, restrict what are currently effective business arrangements for some companies to make them less effective. That would be an enormous change to business culture, and I suspect even if you did restrict what can be agreed in private contract terms, alternative ways to transfer what gets done where would be found very quickly and easily.