Which one of the following statements illustrates a synergistic effect of a merger?
A) The revenue of the combined firm is equal to the revenue of the acquiring firm plus the revenue of the target firm.
B) The costs of the combined firm exceed the costs of the acquiring firm plus the costs of the target firm.
C) The tax liability of the combined firm is greater than the sum of the tax liabilities of each separate firm.
D) The depreciation expense of the combined firm is equal to the depreciation expense of the acquiring firm plus the depreciation expense of the target firm.
E) The capital requirements of the combined firm are less than the sum of the capital requirements of each separate firm.

Question

Quizplus · Accepted Answer

A synergistic effect of a merger implies that the combined entity achieves better performance or efficiency than the sum of its parts. Option E illustrates this by indicating that the capital requirements of the merged firm are less than the combined capital requirements of the individual firms, suggesting efficiency gains or synergies from the merger.

Which One of the Following Statements Illustrates a Synergistic Effect