Two Firms Merge and No Synergies Occur

question 11

Multiple Choice

Two firms merge and no synergies occur.Which statement best explains this unlikely result?

• A)The reduction in risk in the combined firm benefits the bondholders at the expense of the shareholders.
• B)The value of the debt in the combined firm will likely be greater than the value of the debt in the two separate firms.
• C)The size of the gain to the bondholders depends on the specific reductions in bankruptcy probabilities after the merger.
• D)The share price of the acquiring or combined company increases substantially.

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The measure of effectiveness in producing outputs from a given set of inputs, often used in economic and business contexts.

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Financial incentives given to employees or individuals for meeting performance targets or for recognition of their contributions.

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