The incremental gain from a merger is defined as the:
A) Stand-alone value of the target firm minus the synergistic effects.
B) Value of the combined firm minus the sum of the stand-alone values of each firm.
C) Stand-alone value of the acquired firm minus the acquisition costs.
D) The sum of the stand-alone values of both firms minus the acquisition costs.
E) The value of the purchasing firm plus the synergistic effects minus the acquisition costs.

Question

Quizplus · Accepted Answer

The incremental gain from a merger is the additional value created by combining two firms, which is calculated as the value of the combined firm minus the sum of the stand-alone values of each firm. This reflects the synergies or additional value created by the merger that did not exist when the firms were separate.

The Incremental Gain from a Merger Is Defined as The