Roseland Inc has offered 357 million cash for all of the com

Roseland Inc. has offered $357 million cash for all of the common stock in Forest Glade Corporation. Based on the recent market information, Forest Glade is worth $319 million as an independent operation. If the merger makes economic sense for Roseland, what is the minimum estimated value of the synergistic benefits from the merger? (Enter the answer in dollars, not millions of dollars.)

Minimum synergistic benefits: $________________

(Please show steps as well as final results. Thank you!)

Solution

Synergy means that the value of two companies combined will be greater than the sum of the separate individual parts.

Minimum synergistic benefit value should be the amount or premium that is paid over the market worth of the company. The minimum gain that the company seeks from acquisition of company would be the premium it would be ready to pay for a firm.

For this question, minimum synergystic benefit = $357 mil - $319 mil = $38 mil

Answer is hence: 38,000,000