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Which THREE of the following are the most likely benefits of the acquisition to Company M’s shareholders?

Company M is a listed company in a highly technical service industry.

The directors are considering making a cash offer for the shares in Company Q, an unquoted company in the same industry.

Relevant data about Company Q:

• The company has seen consistent growth in earnings each year since it was founded 10 years ago.

• It has relatively few non-current assets.

• Many of the employees are leading experts in their field.

A recent exercise suggested that the value of the company’s human capital exceeded the value of its tangible assets.

The directors and major shareholders of Company Q have indicated willingness to sell the company.

Before negotiations become too advanced, the directors of Company M are considering the benefits to their company that would follow the acquisition.

Which THREE of the following are the most likely benefits of the acquisition to Company M’s shareholders?
A . Access to technical expertise.
B . Reduction of risk through diversification.
C . Improved asset backing for borrowing due to the acquisition of intangible assets.
D . Gain economies of scale.
E . Improve earnings per share (EPS).

Answer: A,D,E

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