Diversification is often a poor motive for mergers because:
A) vertical integration is rarely successful.
B) investors can diversify on their own account.
C) it does not produce economies of scale.
D) the increase in taxes overcomes gains in earnings.

Question

Quizplus · Accepted Answer

Investors can diversify their portfolios on their own without the need for companies to merge solely for the purpose of diversification. Mergers for diversification purposes do not necessarily lead to synergies or increased profitability, and may even result in decreased focus and efficiency. Therefore, diversification is often a poor motive for mergers.

Diversification Is Often a Poor Motive for Mergers Because