Practice Question
In a merger scenario, synergy is defined as the value created from the merger that exceeds the sum of the individual firms' values.
Answer +
TRUE
Step-by-step solutions +
Synergy in mergers and acquisitions (M&A) refers to the concept that the combined value and performance of two companies will be greater than the sum of the separate individual parts. This can result from cost reductions, increased revenue opportunities, improved operational efficiency, or strategic advantages. Synergies are often a key justification for mergers and are categorized as either cost synergies (e.g., reducing redundant operations) or revenue synergies (e.g., cross-selling products).