A firm may be able to achieve greater economies of scale by merging with another firm; particularly
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A firm may be able to achieve greater economies of scale by merging with another firm; particularly in the case of a horizontal merger. When the net income for the combined companies after merger exceeds the sum of the net incomes prior to the merger, synergy is said to exist. For example, in its 2007 acquisition of Dobson Communications Corporation for $2.8 billion in cash, AT&T estimated overhead and operating synergy benefits to have a present value of $2.5 billion. LO1
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