What is meant by positive synergy in a merger?

Positive synergy in a merger refers to the scenario where the combined value of the companies involved in the merger surpasses the sum of their individual values as separate entities. This phenomenon typically arises from various factors, such as cost savings, enhanced revenue potential, or improved efficiencies resulting from the integration of resources, technologies, or personnel.

When firms merge and create positive synergy, they can unlock additional value that was not achievable individually. For instance, they might realize operational efficiencies by eliminating redundancies, cross-selling products to a larger customer base, or leveraging combined expertise to innovate. In this context, the merger is not just a mathematical aggregation but rather a strategic alignment that amplifies strengths and mitigates weaknesses, ultimately leading to greater overall value.

In contrast, the other options do not capture the essence of positive synergy. If the firms had equal contributions after merging, or maintained their original values, this would imply a neutral outcome with no added value generated from the merger. Similarly, if one firm's value outweighed the other's, it suggests a potential imbalance rather than the synergy that enhances overall value.