Synergies, which are due to capturing increased value as a result of a merger, could occur due to which of the following?
A)Access to more and better debt financing
B)Reduction in costs due to overlap of job functions (e.g., layoffs)
C)Increased tax losses transferred from target firm
D)All of the above.

Question

Quizplus · Accepted Answer

All of the listed options can lead to synergies in a merger. Access to more and better debt financing can reduce the cost of capital for the merged entity, leading to increased value. Reduction in costs due to overlap of job functions or layoffs can lead to cost savings and improved operational efficiency, which can increase the value of the merged entity. Increased tax losses transferred from the target firm can result in tax savings for the merged entity, leading to increased value. Therefore, all these factors can contribute to capturing increased value and achieving synergies in a merger.

Synergies, Which Are Due to Capturing Increased Value as a Result