Cases in Finance - Merger and Acquisition

Running head: CASES IN FINANCE
Cases in Finance
Name of the Student
Name of the University
Author’s Note

CASES IN FINANCE1
Table of Contents
Chapter 1: Introduction..............................................................................................................2
Chapter 2: Merger and Acquisition Motives..............................................................................2
Chapter 3: Two Recent Mergers and their Motives...................................................................4
Chapter 4: Conclusion................................................................................................................5
References..................................................................................................................................6

CASES IN FINANCE2
Chapter 1: Introduction
The key objective of this report is the analysis and evaluation of different motives
behind the occurrence of merger and acquisition. Merger and acquisition is considered as a
crucial aspect in the world of corporate finance where two companies gather together to
create more value by maximizing wealth and reducing competition (Florio, Ferraris and
Vandone 2018). This report aims at the discussion of the main motives of merger and
acquisition by providing real life example from Australia.
Chapter 2: Merger and Acquisition Motives
Business organizations pursue merger and acquisition with different motives and
followings are the most common motives of merger and acquisition.
Value Creation – Two business organizations may take the decision of merger and
acquisition with the motive to increase the wealth of the shareholders. Synergies are created
out of consolidation of two business organizations that contribute to the increase in the value
of newly developed business organization. Fundamentally, synergy refers to when the sum of
the value of the two business organizations is surpassed by the value of the merged business
organization. Two types of synergies can be seen which are revenue synergy and cost
synergy (Miśkiewicz 2017).
Diversification – Merger and acquisitions are frequently undertake by the business
organizations for diversification motive. For instance, merger and acquisition may be used by
a business organization to enter into a new market or to offer new products or services.
Another motive is that the managers of the business organizations may arrange merger and
acquisition for risk diversification associated with the business activities. Hence, risk
diversification is a key motive of merger and acquisition (Lee 2017).