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Which of the following motives for mergers make economic sense? (a) Merging to achieve economies of...

Which of the following motives for mergers make economic sense?

  1. (a) Merging to achieve economies of scale.

  2. (b) Merging to reduce risk by diversification.

  3. (c) Merging to redeploy cash generated by a firm with ample profits but limited growth opportunities.

  4. (d) Merging to combine complementary resources.

  5. (e) Merging just to increase earnings per share.

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Answer #1

Following are the economic motives of merger:

(1) Merging to achieve economies of scale.

(2) Merging to redeploy cash generated by a firm with ample profits but limited growth opportunities.

(3) Merging to combine complementary resources.

because these motives results in economic synergy generated from the merger.

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