a. The primary motivation for M&As is an attempt to realize synergy by combining the acquiring and target firms. However, the estimation of synergy is challenging. The acquirer often overestimates potential synergy in an M&A deal and results in overpaying the target. Why is potential synergy often overestimated? (5 marks)

b. Xon Enterprises is attempting to take over Rayon Group. Rayons shareholders have the right to buy additional shares at a below-market price if Xon (considered by Rayons board to be a hostile bidder) buys more than 15% of Rayons outstanding shares. Identify the takeover defense strategy employed by Rayon Group. Explain why it is used and how does it discourage unwanted bidder. (5 marks)