Corox is a chemical manufacturing company, planning to acquire a competing firm

Question

Corox is a chemical manufacturing company, planning to acquire a competing firm Grad. The analyst has estimated that Corox’s standalone value is $562 million, and Grad’s standalone value is $312. The analyst also thinks that Grad is not performing at par with industry peers due to poor management. With a new management team and appropriate restructuring, Grad’s value is estimated to be able to increase by $50 million. Finally, the analyst estimates the value of the two companies after acquisition to be $1.2 billion, assuming Corox has successfully restructured Grad. Based on these estimates, what should be the analyst’s estimated value of synergy between Corox and Grad?

a.

$276 million

b.

$326 million

c.

$50 million

d.

Not enough information

a.

$276 million

b.

$326 million

c.

$50 million

d.

Not enough information

Explanation / Answer

Ans is B 326 million of synergy

1200-(562+312)=326 million

important thing to note here is that 50 million increment in the value of firm Grad is already included in 1.2 billion combined value. hence ans is 326 million of synergy can be realised.

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.