Why might companies pursue synergies through MandA?

Companies pursue synergies through mergers and acquisitions primarily to enhance overall efficiency and profitability. This objective arises from the belief that combining two organizations can lead to cost savings, improved revenue streams, and added value that would be challenging to achieve independently.

When companies merge, they can streamline operations by eliminating duplicate functions, optimizing resource use, and leveraging economies of scale. For instance, shared administrative support and combined purchasing power can result in lower operational costs, while complementary strengths of the companies can drive innovation and expansion into new markets. The ultimate goal is to create a more competitive firm that is better positioned for growth and financial success, thus increasing profitability for shareholders.

In contrast, other options address outcomes that generally do not align with the strategic goals of M&A. Diluting earnings or increasing operational costs would likely deter companies from pursuing a merger or acquisition, as these results are contrary to the aims of creating value. Eliminating competition could be a potential outcome in some cases, but it does not encapsulate the broader objectives that organizations strive for when seeking synergies.