If the sources of synergy is economy of scale in COGs, which of the following statements is true? a. Combined firms sales should be bigger than the sum of the two firms sales. b. Combined firms sales growth rate should be higher than the weighted average of the two firms sales growth rate. c. Combined firms COGs should be bigger than the weighted average of the two firms COGs. d. Combined firms profit margin should be higher than the weighted average of the two firms profit margin.

QUESTION 4 The split of synergy between the target firm and the acquirer depends on the relative negotiation power between the two. Which of the following will tilt the negotiation power towards the target, leading to a higher offer premium? a. Target firm has a well-established distribution channel network in Asia where the Acquiring company attempts to develop a stronger presence. b. Parent company of the target firm is financially distressed and is in dire need for cash. c. Acquiring firm has unique expertise on zero-based budgeting, and is expected to achieve cost savings in the target company after the acquisition is complete. d. Target companys founder passed away and his grown-up children have no interest in managing the company and want to sell.