Synergistic benefits from Merger

Hi Sir,

Please help.

NN sells electrical goods and operates a number of retail outlets in a particular region of the country. NN is in the process of acquiring the share capital of QQ. A company that sells the same type of products in the same region of the country through its own retail stores. Post acquisition NN would be the largest retailer of electrical goods in that region. NN and QQ have perfectly positive correlated cash flow streams because they operate in the same market sector and location.

Which of the 3 would be most likely to be synergistic benefits to NN of purchasing QQ?

1. Cash benefits by sale and leaseback of retail store property acquired
2. Increased sales due to winning a larger portfolio of retail outlets
3. Increased profit due to reduced competition in the region
4. Reduction in staff costs due to elimination of duplicated administrative roles
5. Cost savings due to economies of scale in purchasing activities.

All 5 options seen viable. But the answer says that point 1,2 are not likely synergistic benefits of the merger. Can you explain why please? Why would merger between QQ& NN not increase sales due to winning a larger portfolio?

Thank you.