Cost savings are likely to be greatest when firms with dissimilar operations are merged or consolidated....

Cost savings are likely to be greatest when firms with dissimilar operations are merged or consolidated. True or False

Expert Solution

Merger of companies who are working in different business and have dissimilar operations is called Conglomerate. This conglomeration can be of 2 types. One is Pure conglomerate mergers in which companies coming together have nothing in common. Other is Mixed conglomerate mergers wherein the companies look to expand their product or market.

In my view, maximum of cost synergy will happen when one company can leverage other companies' existing network so that both when combined together can reduce their cost. For example : Company A is in ecommerce sector and selling apparels to the customers but A do not have logistic arm. So they need to subcontract the logistics to other company. Company B is in logistics but is a small player. So if they will come together, they will certainly have higher cost synergies.

If companies are already working in same business, they might have revenue synergies but not cost synergies.

So i agree with the fact that Cost savings are likely to be greatest when firms with dissimilar operations are merged

jeff jeffy answered 2 years ago

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