3. Is synergy a valid rationale for mergers? Describe several situations that might produce synergistic gains?...

3. Is synergy a valid rationale for mergers? Describe several situations that might produce synergistic gains?

refer financial management 16th edition by Brigham and Ehrhardt

please provide the complete answer in a detailed way

Expert Solution

First of all lets try to understand what term the synergy is

Synergies in simple terms in mergers and acquisitions is the situation in which the combined company will be worth more than the two companies would be worth if operating separately

Several situations that might produce synergistic gains include:

1. Results in reduced cost: Imagine two firms plan to combine even though there is no expected increase in sales. If the new entity can reduced the combined fixed cost, this can lead to reduction in average cost per unit by spreading the new lower fixed cost over the same number of units.

2. Can result in achieving more rapid growth: External growth is a much faster way for managers to increase revenues than making investments internally. Further it is considered to be less risky to generate growth by way of acquiring resources through a merger with another company as compared with developing them internally.

3. Increase in market share: If a merger occurs in an industry with few competitors, the newly combined company will have more chances to come up with increased market share. For example if a company acquires a key supplier of raw materials, it may lock out competing firms who may rely on the same raw material. By this the firm may be able to achieve increase in market share.

4. Might result in tax benefits: For example two companies where one has large taxable income and the other has accumulated large tax losses being carry forward. By merging with the company that has tax losses, the acquirer can use the losses to reduce its tax liability.

5. Helps in achieving international business goals: International Merger and acquisition deals have become an important way for multinational companies to achieve cross-border business goals such as extending global market power or gaining access to unique capabilities.

jeff jeffy answered 1 year ago

A. Describe situations in which it might be necessary to trim leading or trailing characters from...

A. Describe situations in which it might be necessary to trim leading or trailing characters from string data input by the user? B. Describe situations in which it might be necessary to pad string data or to replace portions within a string? Consider phone numbers, Social Security numbers, and address details. C. What are other useful methods that use to manipulate a string?

3.Describe how and where sperm are produce.

Choose a business and describe examples of situations where the business might need business income insurance...

Choose a business and describe examples of situations where the business might need business income insurance and consequential damage coverage.

Choose a business and describe examples of situations where the business ness might need business income...

Choose a business and describe examples of situations where the business ness might need business income insurance and consequential dam- age coverage.

There are several different types of tax rates that taxpayers might use in different contexts. Describe...

There are several different types of tax rates that taxpayers might use in different contexts. Describe each tax rate (average, effective, and marginal) and how a taxpayer might use it for tax planning.

3)Explain industry and organisation security practices and rationale 4)Describe an internal administration system such as accounting...

3)Explain industry and organisation security practices and rationale 4)Describe an internal administration system such as accounting system and database.

Describe 3 types of outcomes that might occur as the result of a signaling cascade.

1.Discuss valid, void and voidable contracts in Islamic commercial law. (6marks) 2. Describe three (3) elements...

1.Discuss valid, void and voidable contracts in Islamic commercial law. (6marks) 2. Describe three (3) elements for al-ahliyyah al-ada’ al-kamilah to establish a valid transaction. (9marks) 3. Discuss four (4) conditions of a valid contract pertaining to the subject matter of Islamic sale of contract. 4. Discuss two (2) rationales of hikmah behind the prohibition of riba in Islam. (6 marks) 5. Define these following terms. i. Riba al-buyu’ ii. Riba al-Fadhl iii. Major gharar iv. Minor gharar 6. Define...

Give 3 examples of situations that describe why the relationship between social, economic and ecological aspects...

Give 3 examples of situations that describe why the relationship between social, economic and ecological aspects are important to achieve a sustainable development

3.) Describe why it might be important to study applicant reactions to the personnel selection process....

3.) Describe why it might be important to study applicant reactions to the personnel selection process. 4.) Describe three research findings on reactions to Affirmative Action Programs. 5.) Describe diversity training. 6.) Describe the destructive leader 1.) Describe the difference between the need norm and the equality norm.

Question