Which of the following statements best describes mergers?
A) The acquiring firm's required rate of return in most horizontal mergers will not be affected, because the two firms will have similar betas.
B) Financial theory says that the choice of how to pay for a merger is irrelevant because, although it may affect the firm's capital structure, it will not affect its overall required rate of return.
C) The basic rationale for any consolidation is financial synergy and, thus, the estimation of pro forma cash flows is the single most important part of the analysis.
D) The primary rationale for most operating mergers is synergy.

Question

Quizplus · Accepted Answer

The primary rationale for most operating mergers is synergy, which can come in the form of cost savings, increased market power, or access to new technologies or resources. Financial synergy may still be a factor, but it is not the primary motivation for these types of mergers. Additionally, the choice of how to pay for a merger can have significant impacts on the firm's overall required rate of return, as well as its capital structure and financial performance.

Which of the Following Statements Best Describes Mergers