1. Rationale for mergers Aa Aa Academics and practitioners have identified several major reasons that drive firms' merger, acquisition, and breakup decisions. Correctly identify the term or motive for the merger and acquisition with its description. Term or Motive for Merger Tax considerations Diversification Purchase assets below replacement cost Synergy Description A highly profitable firm in a high tax bracket acquires a firm with substantial accumulated tax losses. If two firms merged, the value of the new company would exceed the current pre-merger values of the individual firms. In January 2006, Adidas-Salomon AG, often referred to as Adidas, acquired US Reebok International Ltd., which helped them capitalize on Reebok's specialty products and become a dominant player in the women's apparel market. This gave Adidas increased market power and cost efficiencies to compete with Nike. Cendant, a huge conglomerate built through several mergers, decided to create four separate companies, Century 21, Avis, Days Inn, and Orbitz-because the managers felt that they would create more value for shareholders as individual companies