The most recent occasion on which there was discussion of a merger of two large clubs in England was Sheffield around ten years ago. The major shareholder of Sheffield United (one Mike MacDonald, who almost bought City from Swales instead of Franny Lee) suggested that Sheffield wasn't able to support two major clubs and that, if it were a one club city, that single club would have the potential to be one of the biggest in England.
I remember him discussing it on BBC's The Money Programme. He recognised that the new club would have to have a new ground and a new kit so that it was genuinely a new club, not alienating fans of one of the teams by effectively making them feel as though they've been taken over by the other.
In theory, when you look at the two Sheffields, United and Wednesday, now both struggling in the third tier but with a current combined average gate of more than 35,000, it's tempting to be seduced by the power that would be enjoyed by a merged club drawing on that support. The problem is that the fans of the two club have loyalty to their own club, not to the new club.
Say United and Wednesday merged and Sheffield City FC, playing in all white with red and blue trim, took the field for their opening at a rebuilt 60K Don Valley stadium, the capacity reflecting the ambitions for the team's pulling power if it became successful. I don't reckon you'd get near the current 35,000 while they worked their way up the pyramid.
Does anyone reckon they'd even attract 50% of the current gates of either club? And if that's right, then no one is going to invest the money it would take to make the merger happen. It's really a non-starter.