When evaluating an acquisition,you should:
A)concentrate on book values and ignore market values.
B)focus on the total cash flows of the merged firm.
C)include synergies.
D)ignore any one-time acquisition fees or transaction costs.
E)ignore any potential changes in management.

Question

Quizplus · Accepted Answer

When evaluating an acquisition, it is important to consider synergies, which refer to the potential benefits or cost savings that may arise from combining the two companies. Focusing solely on book values or total cash flows may not give a complete picture of the potential value of the acquisition, and ignoring one-time acquisition fees or transaction costs can also lead to an inaccurate evaluation. Additionally, potential changes in management should be taken into account as they could impact the success of the merged firm. Therefore, choice C, which recommends including synergies, is the best option.

When Evaluating an Acquisition,you Should