Synergy is created in an acquisition only if the
A)value of the combined firm exceeds the sum of the individual firm's separate values.
B)acquisition is an all-cash transaction at the current market value of the target firm.
C)acquisition increases revenues while also reducing cash costs.
D)acquisition is a tax-free transaction.
E)value of the shares exchanged equal the market value of the target firm's shares.

Question

Quizplus · Accepted Answer

Synergy is the additional value created by the combination of two firms in an acquisition. It can only be achieved if the value of the combined firm surpasses the sum of individual values of the two firms. In other words, the new firm must be worth more than the standalone value of the two firms combined.

Synergy Is Created in an Acquisition Only If the