Asked by Karen Vinci on Jun 04, 2024
Verified
The best rationale for a merger is that the value of the firms combined is:
A) at least equal to the sum of their separate values.
B) greater than the sum of their separate values.
C) less than the sum of their separate values.
D) None of the above
Rationale for Merger
The strategic reasons behind why two companies decide to combine forces, often to achieve synergies, grow market share, or reduce competition.
Firms Combined
Firms Combined typically refers to the merger or consolidation of two or more businesses to form a single combined entity, often aiming for operational efficiencies and expanded market share.
Separate Values
Separate Values pertains to distinctly evaluating different assets, liabilities, or components for financial, analytical, or assessment purposes.
- Comprehend the principle of synergy within the context of mergers and acquisitions, as well as its impact on the aggregate value of the companies involved.
Verified Answer
KB
kandie balletdaireJun 10, 2024
Final Answer :
B
Explanation :
The best rationale for a merger is that the value of the firms combined is greater than the sum of their separate values. Otherwise, there would be no financial incentive for the firms to merge. The merger should create synergies that increase efficiency, reduce costs, or expand markets, which in turn should increase the combined firm's value beyond what each firm might achieve on its own.
Learning Objectives
- Comprehend the principle of synergy within the context of mergers and acquisitions, as well as its impact on the aggregate value of the companies involved.