The positive incremental net gain associated with the combination of two ﬁrms through a merger or acquisition is called (the) ___________.
A) Agency conﬂict.
B) Goodwill.
C) Merger cost.
D) Consolidation effect.
E) Synergy.

Question

Quizplus · Accepted Answer

The positive incremental net gain associated with the combination of two firms through a merger or acquisition is called synergy. This is because the combination of the two firms creates a whole that is greater than the sum of its parts, with the merged entity being able to achieve economies of scale, share resources, and increase competitiveness. Options A, C, and D are not correct as they do not refer to the positive incremental net gain, but rather to other aspects related to mergers and acquisitions (agency conflict, merger cost, consolidation effect). Option B is partially correct as goodwill is a term used in accounting to refer to the excess value of an acquired firm over the fair value of its net assets, but it does not fully capture the concept of the positive incremental net gain.

The Positive Incremental Net Gain Associated with the Combination of Two