The value of combined businesses following a takeover should reflect:
A) The sum of their standalone values
B) The sum of their standalone values less anticipated synergy
C) The standalone value of the target plus net synergy less the standalone value of the acquirer
D) The sum of the standalone values of the target and acquirer plus net synergy
E) None of the above

Question

Quizplus · Accepted Answer

The value of combined businesses following a takeover should reflect the sum of the standalone values of the target and acquirer plus net synergy. This is because a successful merger or acquisition should create value by combining the strengths and resources of both companies, leading to increased efficiency and profitability. Therefore, the combined value should be higher than the sum of the standalone values, and should include the added value from any expected synergy between the companies.

The Value of Combined Businesses Following a Takeover Should Reflect