
<PAGE>

                                                         Exhibit 2



                         AGREEMENT AND PLAN OF MERGER

                                     AMONG

                              PC CONNECTION, INC.

                                PC HOLDCO, INC.

                                      AND

                              PC TRANSITORY CORP.


                               December 29, 1999
<PAGE>

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                     Page

                                   ARTICLE I
                                  THE MERGER
<S>                                                                  <C>
SECTION 1.1    THE MERGER..........................................   2

SECTION 1.2    EFFECTIVE DATE......................................   2

SECTION 1.3    CERTIFICATE OF INCORPORATION........................   2

SECTION 1.4    BYLAWS..............................................   3

SECTION 1.5    DIRECTORS...........................................   3

SECTION 1.6    OFFICERS............................................   3

SECTION 1.7    ADDITIONAL ACTIONS..................................   3

SECTION 1.8    CONVERSION OF SECURITIES............................   4

SECTION 1.9    NO SURRENDER OF CERTIFICATES........................   4

                                  ARTICLE II
               ACTIONS TO BE TAKEN IN CONNECTION WITH THE MERGER

SECTION 2.1    ASSUMPTION OF STOCK INCENTIVE PLAN..................   4

SECTION 2.2    RESERVATION OF SHARES...............................   5

                                 ARTICLE III
                             CONDITIONS OF MERGER

SECTION 3.1    CONDITIONS PRECEDENT................................   5

                                  ARTICLE IV
                                   COVENANTS

SECTION 4.1    ELECTION OF DIRECTORS...............................   5

SECTION 4.2    LISTING OF HOLDING COMPANY COMMON STOCK.............   6
</TABLE>

                                      -i-
<PAGE>

<TABLE>
<S>                                                                   <C>
SECTION 4.3    STOCK INCENTIVE PLAN................................   6

                                  ARTICLE V
                           TERMINATION AND AMENDMENT

SECTION 5.1    TERMINATION.........................................   6

SECTION 5.2    AMENDMENTS..........................................   6

                                  ARTICLE VI
                           MISCELLANEOUS PROVISIONS

SECTION 6.1    GOVERNING LAW.......................................   6

SECTION 6.2    COUNTERPARTS........................................   7

SECTION 6.3    ENTIRE AGREEMENT....................................   7
</TABLE>

                                     -ii-
<PAGE>

                         AGREEMENT AND PLAN OF MERGER

     AGREEMENT AND PLAN OF MERGER (the "Agreement"), entered into as of December
29, 1999, by and among PC Connection, Inc., a Delaware corporation (the
"Company"), PC Holdco, Inc., a Delaware corporation ("Holding") and a wholly
owned subsidiary of the Company, and PC Transitory Corp. a Delaware corporation
("Merger Sub") and a wholly owned subsidiary of Holding.


                            PRELIMINARY STATEMENTS

     1.   The Company's authorized capital stock consists of (i) 30,000,000
shares of common stock, $.01 par value per share (the "Company Common Stock"),
of which as of December 27, 1999, 15,740,895 shares were issued and outstanding
and no shares were held in the Company's treasury; and (ii) 7,500,000 shares of
preferred stock, $.01 par value per share, none of which is currently
outstanding.

     2.   As of the date hereof, Holding's authorized capital stock consists of
(i) 30,000,000 shares of common stock, $.01 par value per share (the "Holding
Common Stock"), of which 100 shares are issued and outstanding and owned by the
Company and no shares are held in treasury, and (ii) 7,500,000 shares of
preferred stock, $.01 par value per share, none of which are outstanding.

     3.   As of the date hereof, Merger Sub has an authorized capital stock
consisting of 100 shares of common stock, $.01 par value per share (the "Merger
Sub Common Stock"), of which 100 shares are issued and outstanding on the date
hereof and owned by Holding.

     4.   The designations, rights and preferences, and the qualifications,
limitations and restrictions of the Holding Common Stock are the same as those
of the Company Common Stock.

     5.   The Certificate of Incorporation of Holding (the "Holding Charter")
and the Bylaws of Holding (the "Holding Bylaws") in effect immediately after the
Effective Date (as hereinafter defined) will contain provisions identical to the
Amended and Restated Certificate of Incorporation of the Company (the "Company
Charter") and Bylaws of the Company (the "Company Bylaws") in effect immediately
before the Effective Time (as defined below) (other than as required by Section
251(g) of the General Corporation Law of the State of Delaware (the "DGCL")).

     6.   The directors and substantially all of the officers of the Company
immediately prior to the Merger (as defined below) will be the directors and
officer of Holding as of the Effective Time.

     7.   Holding and Merger Sub are newly formed corporations organized for the
purpose of participating in the transactions herein contemplated.

     8.   The Company desires to create a new holding company structure by
merging Merger Sub with and into the Company, with (a) the Company continuing as
the surviving corporation of such merger and (b) each outstanding share (or any
fraction thereof) of Company Common Stock
<PAGE>

being converted in such merger into a like number of shares of Holding Common
Stock, all in accordance with the terms of this Agreement (the "Merger").

     9.   The boards of directors of Holding, Merger Sub and the Company, the
Company, in its capacity as the sole stockholder of Holding, and Holding, in its
capacity as the sole stockholder of Merger Sub, have approved this Agreement and
the Merger upon the terms and subject to the conditions set forth in this
Agreement.

     NOW, THEREFORE, in consideration of the premises and the covenants and
agreements contained in this Agreement, and intending to be legally bound
hereby, the Company, Holding and Merger Sub hereby agree as follows:

                                   ARTICLE I
                                  THE MERGER

     SECTION 1.1  THE MERGER. In accordance with Section 251(g) of the DGCL and
subject to, and upon the terms and conditions of, this Agreement, Merger Sub
shall, at the Effective Time, be merged with and into the Company, the separate
corporate existence of Merger Sub shall cease, and the Company shall continue as
the surviving corporation of the Merger (the "Surviving Corporation"). At the
Effective Time, the effects of the Merger shall be as provided in Section 259 of
the DGCL.

     SECTION 1.2  EFFECTIVE DATE. As soon as practicable on or after the date
hereof, the parties shall file this Agreement, executed and certified in
accordance with the relevant provisions of the DGCL, with the Secretary of State
of the State of Delaware and shall make all other filings or recordings required
under the DGCL to effectuate the Merger. The Merger shall become effective as of
12:01 a.m., Eastern Daylight Time, on January 1, 2000 (the "Effective Time").

     SECTION 1.3  CERTIFICATE OF INCORPORATION. From and after the Effective
Time, the Company's Charter, as in effect immediately prior to the Effective
Time, shall be the certificate of incorporation of the Surviving Corporation
(the "Surviving Corporation's Charter") until thereafter amended as provided
therein or by the DGCL, except as follows:

          (a)  Article Fourth thereof shall be amended so as to read in its
entirety as follows:

          "The total number of shares of all classes of capital stock
          which the Corporation shall have authority to issue is 100
          shares of common stock, $.01 par value per share."

          (b)  A new Article Thirteenth shall be added thereto which shall be
and read in its entirety as follows:

                                      -2-
<PAGE>

          "Thirteenth. Any act or transaction by or involving the
          Corporation that requires for its adoption under the General
          Corporation Law of the State of Delaware or this Amended and
          Restated Certificate of Incorporation the approval of the
          stockholders of the Corporation shall, pursuant to Section
          251(g) of the General Corporation Law of the State of
          Delaware, require, in addition, the approval of the
          stockholders of PC Connection Inc., a Delaware corporation,
          or any successor thereto by merger, by the same vote that is
          required by the General Corporation Law of the State of
          Delaware or this Amended and Restated Certificate of
          Incorporation, as the case may be."

     SECTION 1.4  BYLAWS. From and after the Effective Time, the Merger Sub
Bylaws, as in effect immediately prior to the Effective Time, shall constitute
the Bylaws of the Surviving Corporation until thereafter amended as provided
therein or by applicable law.

     SECTION 1.5  DIRECTORS. The directors of the Merger Sub in office
immediately prior to the Effective Time shall be the directors of the Surviving
Corporation and will continue to hold office from the Effective Time until their
successors are duly elected or appointed and qualified in the manner provided in
the Surviving Corporation's Charter and Bylaws, or as otherwise provided by law.

     SECTION 1.6  OFFICERS. The officers of the Merger Sub in office immediately
prior to the Effective Time shall be the officers of the Surviving Corporation
until the earlier of their resignation or removal or until their successors are
duly elected or appointed and qualified in the manner provided in the Surviving
Corporation's Charter and Bylaws, or as otherwise provided by law.

     SECTION 1.7  ADDITIONAL ACTIONS. Subject to the terms of this Agreement,
the parties hereto shall take all such reasonable and lawful actions which may
be necessary or appropriate in order to effectuate the Merger, which shall
include executing and delivering an Assumption Agreement (as hereinafter
defined), effective upon the Merger, in such form as the Company and Holding
determine to be appropriate to evidence the Company's assignment to and
Holding's assumption of such rights, interests, obligations and liabilities as
the Company and Holding determine to be appropriate. If, at any time after the
Effective Date, the Surviving Corporation shall consider or be advised that any
deeds, bills of sale, assignments, assurances or any other actions or things are
necessary or desirable to vest, perfect or confirm, of record or otherwise, in
the Surviving Corporation its right, time or interest in, to or under any of the
rights, properties or assets of either of Merger Sub or the Company acquired or
to be acquired by the Surviving Corporation as a result of, or in connection
with, the Merger or otherwise to carry out this Agreement, the officers and
directors of the Surviving Corporation shall be authorized to execute and
deliver, in the name and on behalf of each of Merger Sub and the Company, all
such deeds, bills of sale, assignments and assurances and to take and do, in the
name and on behalf of each of Merger Sub and the Company or otherwise, all such
other actions and things as may be necessary or

                                      -3-
<PAGE>

desirable to vest, perfect or confirm any and all right, title and interest in,
to and under such rights, properties or assets in the Surviving Corporation or
otherwise to carry out this Agreement.

     SECTION 1.8  CONVERSION OF SECURITIES. At the Effective Time, by virtue of
the Merger and without any action on the part of Holding, Merger Sub, the
Company or the holder of any of the following securities:

          (a) Conversion of Company Common Stock.  Each share of Company Common
              ----------------------------------
Stock (or fraction of a share of Company Common Stock) issued and outstanding
immediately prior to the Effective Time shall be converted into and thereafter
represent one duly issued, fully paid and nonassessable share (or equal fraction
of a share) of Holding Common Stock.

          (b) Conversion of Capital Stock of Merger Sub.  Each share of Merger
              -----------------------------------------
Sub Common Stock issued and outstanding immediately prior to the Effective Time
shall be converted into and thereafter represent one duly issued, fully paid and
nonassessable share of common stock, $.01 par value per share, of the Surviving
Corporation.

          (c) Cancellation of Capital Stock of Holding.  Each share of Holding
              ----------------------------------------
Common Stock that is owned by the Company immediately prior to the Merger shall
automatically be cancelled and retired and shall cease to exist.

          (d) Rights of Certificate Holders.  From and after the Effective Time,
              -----------------------------
holders of Certificates formerly evidencing Company Common Stock shall cease to
have any rights as stockholders of the Company, except as provided by law;
except, however, that such holders shall have the rights set forth in Section
1.9 herein.

     SECTION 1.9  NO SURRENDER OF CERTIFICATES. Until thereafter surrendered for
transfer or exchange, each outstanding stock certificate that, immediately prior
to the Effective Time, evidenced Company Common Stock shall be deemed and
treated for all corporate purposes to evidence the ownership of the number of
shares of Holding Common Stock into which such shares of Company Common Stock
were converted pursuant to the provisions of Section 1.8(a) herein.

                                  ARTICLE II
               ACTIONS TO BE TAKEN IN CONNECTION WITH THE MERGER

     SECTION 2.1  ASSUMPTION OF STOCK INCENTIVE PLAN. Holding and the Company
shall, as of the Effective Time, execute, acknowledge and deliver an assignment
and assumption agreement (the "Assumption Agreement") pursuant to which Holding
will, from and after the Effective Time, assume and agree to perform all
obligations of the Company pursuant to the Company's 1993 Incentive and Non-
Statutory Stock Option Plan (the "1993 Plan") Amended and Restated 1997 Stock
Incentive Plan (the "1997 Plan") and 1997 Employee Stock Purchase Plan (the
"1997 Purchase Plan").The 1993 Plan, the 1997 Plan and the 1997 Purchase Plan
shall be collectively referred to as the "Option Plans". As of the Effective
Time, each option to purchase

                                      -4-
<PAGE>

a share of Company Common Stock which has been granted and is then outstanding
and unexercised under the 1993 Plan and the 1997 Plan ("Existing Stock Option")
shall be converted into an option to purchase one share of Holding Common Stock
at the same exercise price, for the same period and subject to substantially the
same terms and conditions including any stockholder approval which may be
required with respect to the 1993 Plan and 1997 Plan applicable to the relevant
Existing Stock Option ("Substitute Option"); provided, however, that after the
Effective Time no exercise shall occur unless and until the holder of the
Existing Option shall have executed and delivered to Holding an instrument in
such form as Holding may prescribe to evidence his or her acceptance of the
terms and conditions of the Substitute Option.

     SECTION 2.2  RESERVATION OF SHARES. On or prior to the Effective Time,
Holding shall reserve sufficient authorized but unissued shares of Holding
Common Stock to provide for the issuance of Holding Common Stock upon the
exercise of options payable and outstanding under the Option Plans, as assumed
by Holding.

                                  ARTICLE III
                             CONDITIONS OF MERGER

     SECTION 3.1  CONDITIONS PRECEDENT. The obligations of the parties to this
Agreement to consummate the Merger and the transactions contemplated by this
Agreement shall be subject to fulfillment or waiver by the parties hereto of
each of the following conditions:

          (a) Prior to the Effective Time, the Holding Common Stock to be issued
pursuant to the Merger shall have been approved for listing, upon official
notice of issuance, by the Nasdaq Stock Market ("Nasdaq").

          (b) Prior to the Effective Time, no order, statute, rule, regulation,
executive order, injunction, stay, decree, judgment or restraining order shall
have been enacted, entered, promulgated or enforced by any court or governmental
or regulatory authority or instrumentality which prohibits or makes illegal the
consummation of the Merger or the transactions contemplated hereby.

                                  ARTICLE IV
                                   COVENANTS

     SECTION 4.1  ELECTION OF DIRECTORS. The Company, in its capacity as the
sole stockholder of Holding, shall elect each person who is then a member of the
board of directors of the Company as a director of Holding (and to be the only
directors of Holding), each of whom shall serve until the next annual meeting of
shareholders of Holding and until his successor shall have been elected and
qualified or until such director's early resignation or removal.

     SECTION 4.2  LISTING OF HOLDING COMPANY COMMON STOCK. Holding shall use its
best efforts to obtain, at or before the Effective Time, authorization to list
on

                                      -5-
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Nasdaq, upon official notice of issuance, Holding Common Stock issuable pursuant
to the Merger.

     SECTION 4.3  STOCK PLANS. The Company and Holding shall take or cause to be
taken all actions necessary or desirable in order for Holding to assume the
Option Plans and the Purchase Plan.

                                   ARTICLE V
                           TERMINATION AND AMENDMENT

     SECTION 5.1  TERMINATION. This Agreement may be terminated and the Merger
contemplated hereby may be abandoned at any time prior to the Effective Time by
action of the board of directors of the Company, Holding or Merger Sub if it is
determined that for any reason the completion of the transactions provided for
herein would be inadvisable or not in the best interest of such corporation or
its stockholders.  In the event of such termination and abandonment, this
Agreement shall become void and neither the Company, Holding or Merger Sub nor
their respective stockholders, directors or officers shall have any liability or
rights with respect to such termination and abandonment.

     SECTION 5.2  AMENDMENTS. This Agreement may be supplemented, amended or
modified by the mutual consent of the boards of directors of the parties to this
Agreement; provided, however, that, any amendment effected subsequent to
stockholder approval shall be subject to the restrictions contained in the DGCL.
No amendment of any provision of this Agreement shall be valid unless the same
shall be in writing and signed by all of the parties hereto.

                                  ARTICLE VI
                           MISCELLANEOUS PROVISIONS

     SECTION 6.1  GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws.

     SECTION 6.2  COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which when executed shall be deemed to be an original but
all of which shall constitute one and the same agreement.

     SECTION 6.3  ENTIRE AGREEMENT. This Agreement, including the documents and
instruments referred to herein, constitutes the entire agreement and supersedes
all other prior agreements and undertakings, both written and oral, among the
parties, or any of them, with respect to the subject matter hereof.

                                      -6-
<PAGE>

     IN WITNESS WHEREOF, Holding, Merger Sub and the Company have caused this
Agreement to be executed as of the date first above written above by the
respective officers thereunto duly authorized.

                              PC CONNECTION, INC.


                              By: /s/ Patricia Gallup
                                 ----------------------------------

                              Name:________________________________

                              Title:_______________________________


                              PC HOLDCO, INC.


                              By: /s/ Patricia Gallup
                                 ----------------------------------

                              Name:________________________________

                              Title:_______________________________


                              PC TRANSITORY CORP.


                              By:   /s/ Robert F. Wilkins
                                 ----------------------------------

                              Name:________________________________

                              Title:_______________________________

                                      -7-
