When mergers and acquisitions are undertaken in pursuit of synergy which of the following relationships describes the beliefs that guide managers. Let A and B represent the firms involved. A) value of A and B merged value of A + value of B if the firms remain separate B) value of A and B merged = value of A + value of B if the firms remain separate C) value of A and B merged value of A + value of B if the firms remain separate

Question

When mergers and acquisitions are undertaken in pursuit of synergy which of the following relationships describes the beliefs that guide managers. Let A and B represent the firms involved.
A) value of A and B merged > value of A + value of B if the firms remain separate
B) value of A and B merged = value of A + value of B if the firms remain separate
C) value of A and B merged < value of A + value of B if the firms remain separate
D) value of A minus B > value of A + value of B if the firms remain separate

Quizplus · Accepted Answer

The belief that guides managers in pursuing mergers and acquisitions in pursuit of synergy is that the value of A and B merged should be greater than the sum of the values of A and B if the firms remain separate. This means that the combined value of the merged firm is greater than the individual values of the firms before the merger, due to factors such as cost savings, increased market power, and operational efficiencies. This belief is reflected in choice A, which states that the value of A and B merged is greater than the value of A + value of B if the firms remain separate. The other choices are not consistent with the belief in the synergy created by the merger.

When Mergers and Acquisitions Are Undertaken in Pursuit of Synergy