The value of ﬁrm B to ﬁrm A is equal to the value of:
A) Firm B as a stand-alone ﬁrm plus the synergy value.
B) The incremental beneﬁt of the merger or acquisition.
C) The incremental cash ﬂows from the merger or acquisition.
D) The incremental cash ﬂows minus the value of ﬁrm B as a stand-alone ﬁrm.
E) The ﬁrm AB plus the incremental gain.

Question

Quizplus · Accepted Answer

The value of firm B to firm A is equal to the value of firm B as a stand-alone firm plus the synergy value. This is because when the two firms merge, they are able to create value that they would not have been able to achieve alone. Therefore, firm B has additional value to firm A, which is the combined value of both firms plus the synergies achieved through the merger or acquisition.

The Value of ﬁRm B to ﬁRm a Is Equal