For a Merger to Add Value to Both Sets of Shareholders

question 16

Multiple Choice

For a merger to add value to both sets of shareholders realistic synergies must be identified and achieved. This implies

• A)The buyer must have intimate knowledge of the company being bought
• B)The company being bought must have detailed knowledge about the acquirer
• C)Both A and B are true
• D)Neither A nor B really matters, as everything depends on postmerger integration in the end

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Definitions:

Long-Term Debt

A type of loan or borrowing that is due for repayment in more than one year.

Tax System

A tax system is the structured framework within which taxes are imposed on individuals, corporations, goods, and services by a government entity.

Equity Financing

A method of raising capital by selling company shares to investors, in exchange for ownership interest.

Debt Financing

The process of raising capital through the sale of bonds, bills, or notes to individual and/or institutional investors.