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Dear sir,
There is a paragraph in the Kaplan Text that says that that combining complementary needs is a reason for a merger/acqn. How is that so? I didn’t get that.Also, how does it help in economies of scale and asset stripping?( what is asset stripping?)
Thanks
This is really knowledge from Paper P3.
Combining complementary needs is where both companies are buying the same sort of things and so the two together need less in total (or can get cheaper because they are buying more) – this is economy of scale. Asset stripping is selling off assets that are not longer needed (the two companies together may have duplicate assets which they don’t need – for example they will have two head offices before the merger, they probably only need one head office afterwards.)
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