Options:

(1). Tax considerations / Synergy / Purchase assets below replacement cost / Diversification

(2). Tax considerations / Synergy / Manager's personal incentives / Diversification

(3). Tax considerations / Synergy / Manager's personal incentives / Diversification

(4). Tax considerations / Breakup value / Manager's personal incentives / Diversification

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. Description Term or Motive for Merger 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. 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