Mergers and Aquisition

Of the reasons proposed through different theories, Trautwein (1990) indicates that the initiators M&A activities usually in a bid to justify their actions refer to synergy and valuations as that deal that its primary aim is to bring value positively to the present situation of the company. Naturally no claims have been made about the primarily motive being to achieve monopoly or where managements are doing this for their own benefits only also note that there is little evidence in both practice and research on the motives implied by the process and the raider theories. He discusses disturbance theory as well but it is not considered in this section since M&A is then considered at the macro-economic level rather than the micro-economic (i.e., firm) level. On the other hand, Gaughan (2002) takes a more pragmatic view to identify M&A motives by referring back to theories but heavily supporting with multiple empirical case studies. According to this author, four main motives are:

(1) M&A is considered as a means for firms to grow quickly; (2) M&A firms hope to experience economic gains as a result of economies of

scale or scope; (3) a larger firm as a result of M&A may have a better access to capital market,

which later leads to a lower cost of capital, i.e., financial benefits; and (4) M&A is aimed at anticipated gains which a firm may experience when

applying its superior management skills to the target’s business.

All of the three authors concur that M&A is driven by many complex motives, which can vary from deal to deal and cannot be fully justified by any single theory/ approach.