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.

---

Definitions:

Ambiguous Tasks

Tasks or assignments that have unclear objectives, paths, or expected outcomes, requiring interpretation and creativity for resolution.

Leadership Styles

The various approaches and methods leaders use to motivate, guide, and manage their teams, such as authoritarian, democratic, and laissez-faire.

Follower's Needs

The requirements or desires of individuals who follow or are led by others, influencing their satisfaction and performance.

Path-goal Theory

A leadership theory that suggests that the leader's job is to assist followers in attaining their goals and to provide the necessary direction and support to ensure that their goals are compatible with the overall objectives of the group or organization.