Consider the following equation:

Question

Consider the following equation:  <   The term S in this equation refers to
A) the premerger (standalone) value of the target. 
B) the premerger (standalone) value of the acquirer. 
C) the value of the synergies created by the merger. 
D) new shares to pay for the target.

Quizplus · Accepted Answer

The term S represents the value of the synergies created by the merger, which is the additional value generated by combining the two companies. The equation suggests that the combined value of the two companies after the merger (represented by the third term) is greater than the sum of their independent values before the merger (first and second terms). Therefore, the difference between the two sums (represented by term S) represents the value created by the merger, or the synergies.

Consider the Following Equation: < the Term