Mergers question answers

Jun 15th, 2016
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Computech inc and CCI merger case study

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Running head: MERGERMerger AnalysisName of studentInstitutional AffiliationMERGER2Question oneThere are five factors proposed by financial managers that provide a rationalefor mergers. They are (1) tax considerations, 2) diversification, (3) control (4) purchaseof assets below replacement cost, and (5) synergy. Tax consideration is a justifiablereason for corporate mergers. With a merger there is enhanced financial economies.The financial economies normally include higher debt capacity as well as cheapertransactions costs. The resultants point out to lower tax considerations. Because tax lawsare reasonable, tax avoidance is reasonable as well, in numerous cases, taxconsiderations also indicate a socially valid rationale for mergers. Reason being in theabsence of a merger, the less unprofitable company might be able to use its tax in othermeans with the results being disastrous to the company wellbeing.In the same way and from the community standpoint, synergy is one of the concept thatis highly socially justifiable in the case of mergers. Synergy refers to a situation wherethe enterprise combination is in excess of the total values before the merger happened.Under synergy, the total of all the departments and organization parts must increasesignificantly. In such a situation value is created which is then shred among theshareholders of the tow merged firms. Synergy comes as a result of many sources withthe most common ones being increase in operat

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