Cases in Finance - Merger and Acquisitions

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
Introduction................................................................................................................................2
Motives of Merger and Acquisition...........................................................................................2
Two Recent Mergers and Their Motives...................................................................................4
Conclusion..................................................................................................................................5
References..................................................................................................................................6

CASES IN FINANCE2
Introduction
Merger and acquisitions are considered as the process of consolidation of the business
organizations. When distinguishing these two terms, merger refers to the combination of two
firms and the occurrence of acquisition can be seen when one company takes over another
company (Greve and Man Zhang 2017). This report is grounded on different facets of merger
and acquisition. This report is divided into two key parts. The first part focuses on discussing
the main motives behind merger and acquisition. The second part focuses on discussion two
instances of merger and acquisition in Australia for analysing their motives.
Motives of Merger and Acquisition
There are certain motives which work behind the decision of merger and acquisition
and these are discusses below:
Synergies through Consolidation – Gaining synergies is a key motive for merger and
acquisition. The occurrence of merger and acquisition creates a situation where the
combination of two companies creates more value as compared to the total of the separate
firms. This provides the companies with the benefits other than economies of scale and
operating economies is a key type of benefit. Other benefits includes the development of
synergies from improved managerial abilities, innovativeness, creativity, increased horizon of
opportunities and enhanced ability to cover research and development because of
complementarily of resources (Hassan, Ghauri and Mayrhofer 2018).
Diversification – Reduction of risk with the help of diversification is another common
motive of merger and acquisition. Correlation of the earnings of the merging firms decides
the level to which there will be reduction in risk. Negative correlation contributes to the
reduction of more risks and positive correlation leads to lesser reduction of risks. This also