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

Incremental gain from a merger is the difference between the value of the combined firm and the sum of the stand-alone values of each firm. This represents the value created through synergies and economies of scale resulting from the merger. Choices A, C, D, and E are incorrect as they do not accurately define the incremental gain.

The Incremental Gain from a Merger Is Deﬁned as The