End the Merina Monarchy is a decision available to 
France.
It requires that France have influenced 
Madagascar, which usually comes after The Lambert Charter. The decision cannot be taken if Madagascar is player-controlled.
End the Merina Monarchy requires Madagascar to be uncivilized and in France's Sphere of Influence. France then needs to have invented Mission to Civilize and researched Expressionism, as well as being at Peace.
The decision annexes Madagascar proper with no other effects or drawbacks. The ingame text says: Following a local uprising in 1897 France, who had long held Madagascar in its sphere of influence, formally deposed the Royal House and annexed the island.
The decision is frankly far from being historically accurate, since there was never a peaceful annexation of Madagascar. There were several wars between the Merina people and France and the annexation was not initially the entire island.