Practice Problem – Reasons for M&A

Practice Question

Cases in Finance
Mergers and Acquisitions
Reasons for M&A
Short Answer

In a merger, what is the primary reason for acquiring a target company?

Answer +
E
Step-by-step solutions +
The primary reasons for acquiring a target company in a merger include:
  • Achieving synergies: Cost or revenue enhancements resulting from combined operations.
  • Market share expansion: Acquiring competitors helps increase market presence.
  • Diversification: Expanding into new markets or products to reduce dependency on core operations.
  • Eliminating competition: Reducing the number of players in the industry can increase pricing power.
These strategic motivations can significantly enhance the acquirer's long-term value.