What is an agreement between two firms to join together and form a new enterprise called?

The correct answer is a merger. A merger occurs when two firms agree to join together to become a single entity. This is often done to enhance market share, increase efficiency, or achieve economies of scale. In a merger, both firms typically contribute their assets and operations to form a new, unified organization.

While a joint venture is another form of cooperation between firms, it specifically refers to a temporary partnership targeted at a particular project or purpose, rather than the combination of both companies into a single entity. An acquisition involves one company taking over another, which is different from a mutual agreement to merge. A franchise is a completely distinct concept, involving a legal relationship where one party licenses the use of its brand and business model to another party, rather than forming a new firm together.