True or False, A merger produces an economic gain only if the two firms are worth more together than apart?
Answer : True
Two businesses can merge to form one company that is capable of
producing more revenue than either could have been able to
independently, or to create one company that is able to eliminate
or streamline redundant processes, resulting in significant cost
reduction. Because of this principle, the potential synergy is
examined during the merger and acquisition process. If two
companies can merge to create greater efficiency or scale, the
result is what is sometimes referred to as a synergy
merge.
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