The value of a target firm to the acquiring firm is equal to:
A) The value of the target firm as a separate entity plus the incremental value derived from the acquisition.
B) The purchase cost of the target firm.
C) The value of the merged firm minus the value of the target firm as a separate entity.
D) The purchase cost plus the incremental value derived from the acquisition.
E) The incremental value derived from the acquisition.

Question

Quizplus · Accepted Answer

The value of a target firm to the acquiring firm is indeed the sum of its standalone value plus any additional value (synergies, strategic advantages, etc.) that arises from the acquisition. This encompasses both tangible and intangible benefits that the acquiring firm expects to realize.

The Value of a Target Firm to the Acquiring Firm