If a merger creates synergy, then the:
A) merger is classified as a taxable transaction.
B) acquiring firm's shareholders will receive a one-time cash payment.
C) equity of the target firm will be increased by the amount of the synergy.
D) value of the merged firm exceeds the combined value of the separate firms.
E) price paid by the acquiring firm will be reduced by the amount of that synergy.

Question

Quizplus · Accepted Answer

Synergy is the increase in value that results from combining two companies. If a merger creates synergy, it means that the merged firm's value will exceed the combined value of the two separate firms. This is why a merger is often seen as a way of creating value for shareholders.

If a Merger Creates Synergy, Then The