Which of the following is not a direct source of value in a merger?a. Tax synergyb. Better investment policyc. Diversification synergyd. Growth synergy
Question
Which of the following is not a direct source of value in a merger?a. Tax synergyb. Better investment policyc. Diversification synergyd. Growth synergy
Solution
The option that is not a direct source of value in a merger is b. Better investment policy.
Here's why:
a. Tax synergy: This is a direct source of value in a merger because the combined company can often achieve a lower tax rate than the two companies could individually.
b. Better investment policy: While a better investment policy can certainly add value to a company, it is not a direct result of a merger. It's something that can be improved regardless of a merger.
c. Diversification synergy: This is a direct source of value in a merger because the combined company can spread risk across a larger portfolio of businesses or assets.
d. Growth synergy: This is a direct source of value in a merger because the combined company can often achieve faster growth than the two companies could individually.
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