1. Rationale for mergers 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. Description A highly profitable firm in a high tax bracket acquires a firm with substantial accumulated tax losses. A firm acquires a foreign subsidiary in an effort to stabilize earnings. A merger is driven by the managers' desire to increase the size of the firm rather than by strict economic analysis. 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. Term or Motive for Merger Diversification Tax considerations Purchase assets below replacement cost Synergy