Question

Following a press release announcing a merger, which of the following argument might be expressed by the acquiring firm to support the merger?

i. strategic beachhead
ii. diseconomies of scale
iii. reduced costs per unit produced
iv. increased use of debt

a. I and III only
b. II. III and IV only
c. I, Ill and IV only
d. I, II and IV only

Answer 1

The acquiring firm may express strategic beachhead, reduced costs per unit produced, and increased use of debt to support the merger. Therefore, the correct option is A) I and III only.

Step-by-step explanation:

The argument that might be expressed by the acquiring firm to support the merger includes the following:

1. Strategic beachhead: The acquiring firm may argue that the merger will provide them with a strategic advantage in entering a new market or expanding their presence in an existing market.
2. Reduced costs per unit produced: The acquiring firm may highlight the potential cost savings that can be achieved through economies of scale by combining their operations with the target company.
3. Increased use of debt: The acquiring firm may emphasize the financing benefits of the merger, such as accessing additional capital through debt financing.

Therefore, the correct answer is option A) I and III only.