Answer all three parts to this question relating to mergers and acquisitions.

1. Smaller and newer firms in the software and technology sectors are often targets for mergers and takeovers. Discuss two reasons a larger firm may view a smaller software or technology company as an attractive target for an acquisition. (4 marks)

2. Takeover offers are not always welcomed by target companies. Explain one takeover defence strategy a target company can employ to ward off an acquirers interest in the target firm.

(1 mark)

Do shareholders of target and acquiring companies always derive tangible benefits from a takeover? Why or why not?