Certified Financial Management Specialist Practice Exam

What is a common outcome of a successful merger or acquisition?

1. Increased operational efficiency.

2. A decrease in company size and market reach.

3. Higher employee turnover rates.

4. Reduction in market presence.

The correct answer is: Increased operational efficiency.

A successful merger or acquisition often leads to increased operational efficiency, as the combined entities can leverage their respective strengths, consolidate resources, and eliminate redundancies. This operational efficiency can manifest in various ways, such as streamlined processes, reduced costs, and enhanced innovation through the sharing of best practices and technologies. Moreover, by merging or acquiring another company, organizations can achieve economies of scale, which can lead to lower production costs and improved profit margins. The integration of different teams and capabilities can also foster a more robust competitive positioning, enabling the newly formed entity to respond more effectively to market demands and challenges. In contrast, the other outcomes listed generally reflect negative consequences that organizations strive to avoid. For instance, a decrease in company size and market reach typically suggests a failure in the merger or acquisition strategy, along with higher employee turnover rates, which can disrupt operations and hinder future growth. Similarly, a reduction in market presence would indicate that the merger or acquisition did not achieve its intended goals, thus undermining both companies' market positions. Therefore, increased operational efficiency stands out as a key benefit that successful mergers and acquisitions aim to achieve.