In the context of M&A, which of the following statements is correct?

Question

BlackTom AI · Accepted Answer

The question asks about M&A and asks which statement is correct. The lone option provided is: 'The acquisition premium the acquirer can afford is smaller when the synergies are smaller.'

To evaluate this, consider what acquisition premium represents: the amount above the target's standalone value that the acquirer is willing to pay. A key driver of that willingness is the expected value of synergies—cost savings, revenue enhancements, or other incremental benefits arising from the combination.

If synergies are large, the combined entity is worth more than the sum of its parts, which can justify a higher premium to persuade the target to agree to the deal. Conversely, when synergies are small, the incremental value created by the merger is limited, reducing the amount of premium that would be justifiable to the target's shareholders and to the board.

Therefore, the statement aligns with the logic that smaller synergies imply a smaller premium can be justified, because there is less additional value to be captured from the integration. However, it is worth noting that in practice, acquisition premiums are influenced by multiple factors beyond synergies alone, such as strategic fit, bidding dynamics, market competition, target’s negotiation strength, and deal certainty. These nuances mean the premium is not determined solely by synergy size, though the core idea that smaller synergies support a smaller justifiable premium is sound.

Given there are no other answer options to compare, this analysis focuses on the single statement's internal consistency and its relation to the general M&A valuation logic.

COMM_V 370 101-108 2025W1 COMM 370 2025W1 - Practice Final

In the context of M&A, which of the following statements is correct?

查看解析

登录即可查看完整答案

类似问题

What happens in the takeover market when a company performs poorly?

Which of the following statements is CORRECT?

Which of the following best explains why M&A activity tends to cluster in waves:

Which of the following is true about motivations for takeovers?

A conglomerate merger between two unrelated firms is most likely to create value when:

According to the Australian Financial Review, 2015 was called as _________________ because China Investment Corporation won $2.45 billion investment office portfolio.

Which of the following is an important factor driving the decision on whether the firm uses cash or stocks to acquire another value enhancing firm?

更多留学生实用工具

考试浏览器助手

风格化写作助手

论文查重助手

文献引用助手

课堂转译助手

课堂笔记助手

Quiz搜索助手

学校历年真题

智能刷题助手

智能匹配练习

希望你的学习变得更简单